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THE  LAW 


OF 


NEGOTIABLE   INSTRUMENTS 


STATUTES,  CASES  AND  AUTHORITIES 


EDITED    BY 

ERNEST  W.  HUFFCUT 

PROFESSOR     OF     LAW     IN     CORNELL     UNIVERSITY 
COLLEGE     OF     LAW 


NEW  YORK 

BAKER,  VOORHIS   &   COMPANY 

1898 


T 
1898 


COPYRIGHT,    i8g8 

By  Ernest  W.  Huffcut 


WEED-PARSONS     PRINTING     COMPANY 

PRINTERS   AND    ELECTROTYPERS 

ALBANY,    N.  Y. 


PREFACE. 


The  enactment  of  the  Negotiable  Instruments  Law  in  several 
American  States  and  its  probable  enactment  in  others,  renders 
necessary  a  familiarity  with  that  Code  on  the  part  of  all  law 
students.  Founded  as  it  is  upon  the  Digest  of  Judge  Chalmers, 
afterward  enacted  into  the  English  Bills  of  Exchange  Act,  it  pre- 
sents the  best  statement  available  of  the  results  of  English  and 
American  judicial  decisions.  Even  before  its  adoption  by  the 
legislatures  in  Great  Britain  and  the  United  States,  Judge  Chal- 
mers' Digest  had  been  edited  for  use  in  law  schools,  and  had  met 
with  much  favor  for  purposes  of  study  and  instruction. 

A  Digest  or  Code  is,  however,  but  a  set  of  abstract  rules.  The 
student  needs  to  see  the  rules  in  operation  upon  concrete  facts  in 
order  to  appreciate  their  force  and  effect.  It  is  the  purpose  of 
this  book  to  set  over  against  each  important  rule  a  case  or  a  selec- 
tion of  cases  from  which  the  rule  might  be  deduced  did  no  Code 
exist  and  in  which  the  rule,  as  embodied  in  the  Code,  may  be 
studied  in  its  application  to  concrete  facts.  In  this  way  it  is 
hoped  to  give  vitality  and  interest  to  what  are  otherwise  mere 
abstract  propositions  of  law.  As  to  the  relation  of  the  cases 
to  the  Code,  the  reader  is  referred  to  Judge  Chalmers'  remarks, 
found  on  page  1 19  of  this  work,  and  to  the  opinion  of  Lord 
Herschell  on  page  127,  and  of  Lord  Russell  of  Killowen  on  page 
442. 

Under  the  sections  of  the  statute  will  be  found  references  to  the 
"Cases  and  Authorities"  which  make  up  Part  II  of  the  work. 
Conversely  there  is  set  opposite  the  title  to  each  case  the  section 
number  of  the  statute  which  is  applicable  to  it.  Under  this 
arrangement  the  student  has  constantly  before  him  the  enactment 
of  the  legislatures  and  the  decisions  of  the  courts. 


IV  PREFACE. 

In  Article  I,  dealing  mainly  with  matters  of  historical  interest, 
the  editor  has  made  free  use  of  the  Introduction  to  Chalmers' 
Digest  and  of  the  first  two  chapters  of  Mr.  Scrutton's  Elements 
of  Mercantile  Law.  Elsewhere  in  the  book,  two  or  three  chapters 
of  Byles'  Treatise  on  Bills  of  Exchange  have  been  reprinted,  where 
a  selection  of  cases  would  have  occupied  space  out  of  proportion 
to  the  importance  of  the  subject.  The  topics  of  "Guaranty," 
"Non-negotiable  Notes,"  and  some  others  of  minor  interest,  have 
been  added  to  those  included  within  the  Negotiable  Instruments 
Law. 

In  the  preparation  of  the  book  the  editor  has  derived  the 
greatest  assistance  from  the  well-known  works  of  Sir  John  Byles, 
Mr.  Daniel,  and  Professor  Ames,  and  from  the  article  on  Bills  of 
Exchange  in  the  second  edition  of  the  American  and  English 
Encyclopedia  of  Law. 

The  book  is  intended  primarily  for  students.      It  constitutes, 

however,   a  somewhat  complete    annotation   of   the    Negotiable 

Instruments  Law,  and  as  such  may  prove  of  value  to  practitioners. 

On  many  points,  editorial  notes  have  been  added,  in  order  to  give 

greater  completeness  to  the  subject  treated,  and  to  indicate  any 

conflict  of  authority  that  may  have  preceded  the  enactment  of 

the  statute. 

E.  W.  K. 

Cornell  University, 

February^  1898. 


TABLE   OF  CONTENTS. 


PART  I. 
Statutes. 


American  Negotiable  Instruments  Law 3 

English  Bills  of  Exchange  Act 85 


PART  II. 
Cases  and  Authorities. 

ARTICLE  I. 
General  Provisions, 


PAGE. 


I.  Codes  governing  bills,  notes  and  checks 117 

1.  The  English  Bills  of  Exchange  Act 117 

2.  The  American  Negotiable  Instruments  Law 122 

3.  Continental  Codes 125 

II.  Construction  of  codifying  statutes 127 

III.  The  law  merchant 132 

1.  The  Law  Merchant  and  its  history 132 

2.  History  of  negotiable  instruments 142 

(a)  Bills,  notes  and  checks 142 

(i>)   Other  negotiable  paper 149 

ARTICLE  II. 

Form  and  Interpretation. 

(/)  Form  Required. 

I.  Writing  and  signature 161 

II.  Unconditional  promise  or  order  to  pay  a  sum  certain  in  money..  164 

1.  A  note  must  contain  a  promise 164 

2.  A  bill  must  contain  an  order 173 

3.  The  promise  or  order  must  be  unconditional 176 

{a)     Conditional  promises  or  orders  not  negotiable 176 

(U)     An  order  or  promise  to  pay  out  of  a  particular  fund  is  con- 
ditional   180 

[v] 


Vi  TABLE    OF   CONTENTS. 

PAGE. 

(<r)     An  indication  of  a  particular  fund  does  not  render  order 

or  promise  conditional  .  . . ' 183 

(d)  Nor  a  statement  of  transaction  which  gives  rise  to  instru- 
ment     190 

4.  The  sum  to  be  paid  must  be  certain 195 

{a)    What  amounts  to  certainty  generally 195 

(/')     Engagement  to  pay  interest:  contingency 199 

(r)     Engagement  to  pay  by  instalments:  contingency 202 

(d)    Engagement  that  on  default  whole  shall  be  due 20S 

{e)     Engagement  to  pay  exchange 212 

(/)  Engagement  to  pay  costs  of  collection  or  attorney's  fees. .  215 

5.  Must  be  payable  in  money 218 

{a)     Payment  must  be  in  money.    218 

(/')     What  constitutes  current  money 219 

6.  Must  not  order  or  promise  any  act  in   addition   to  payment  of 

money •  •  228 

(a)     Effect  of  additional  stipulations. 22S 

{b)     Exceptions:     (i)  Authorizing  sale  of  collateral 229 

(2)  Authorizing  confession  of  judgment 230 

(3)  Waiving  exemptions 231 

(4)  Election   to  require  something  in  lieu  of 

money 233 

III.  Payable  on  demand  or  at  a  determinable  future  time. 234 

1.  When  payable  on  demand 234 

(^7)     Payable  at  sight 234 

{b)     No  time  for  payment  expressed 236 

((•)     Issued,  accepted  or  indorsed  when  overdue 236 

2.  When  payable  at  a  fixed  or  determinable  future  time 238 

■   {a)     A  fixed  time  after  date  or  sight 238 

{b)     On  or  before  a  fixed  determinate  time  specified 238 

(<•)     On  or  at  a  fixed  period  after  the  occurrence  of  a  specified 

event 240 

3.  When  payable  on  a  contingency 241 

IV.  Payable  to  order  or  bearer 248 

1.  Payable  to  order  of  a  specified  person 248 

{a)     Payee  must  be  certain 24S 

{b)     Payee  may  be:     (i)  One  not  maker,  drawer  or  drawee.  .  .  254 

(2)  Drawer  or  maker 254 

(3)  Drawee 254 

(4)  Two  or  more  payees  jointly 255 

(5)  One  or  more  of  several  payees 258 

(6)  The  holder  of  an   office   for   the  time 

being 261 

2.  Payable  to  bearer 263 

{a)     Payable  to  person  named  or  bearer ....  263 

{b)     Payable  to  order  of  fictitious  person 263 

(c)     Payable  to  name  not  purporting  to  be  name  of  any  person.  268 

{d)    When  only  or  last  indorsement  in  blank 268 

V.  Drawee  must  be  certain 270 


TABLE   OF   CONTENTS.  Vll 

PAGE. 

VI.   Delivery  essential  275 

VII.  Non-essentials 283 

(//)  I nte7-pretation. 

VIII.  Date 285 

IX.    BLA^•KS,  AUTHORITY   TO   FILL 288 

X.  Ambiguous  language 298 

1.  Discrepency  between  words  and  figures 298 

2.  Interest,  how  computed 301 

3.  Instrument  not  dated 3'5i 

4.  Conflict  between  written  and  printed  provisions 301 

5.  Doubt  whether  bill  or  note 302 

6.  Irregular  signatures ■ 302 

7.  Joint  and  several  liability 302 

XI.  Ambiguous  signatures 304 

1.  Only  those  liable  whose  signatures  appear 304 

2.  Assumed  or  trade  name 306 

3.  Liability  of  person  signing  as  agent "h^i 

4.  Indorsement  by  infant  or  corporation 321 

5.  Forged  signatures 322 

ARTICLE    III. 

Consideration  of  Negotiable  Instruments. 

I.  Presumption  of  consideration 325 

II.  What  constitutes  consideration 327 

1.  Payment  of  pre-existing  debt 327 

2.  Collateral  security  for  pre-existing  debt 327 

III.  Holder  for  value 334 

IV.  Effect  of  want  of  consideration 338 

V.  Liability  of  accommodation  party 339 

ARTICLE  IV. 

Negotiation. 

I.  What  constitutes  negotiation  or  transfer 34i 

1.  Transfer  by  delivery 342 

2.  Transfer  by  indorsement  and  delivery 343 

{a)  Transfer  by  indorsing  assignment 343 

{h)  Transfer  by  indorsing  guaranty 34^ 

II.  Indorsement  :  form  required ■    •  •  34^ 

1.  Must  be  written  on  instrument  or  allonge 34^ 

2.  Must  be  of  entire  instrument 350 

III.  Indorsement:    kinds  of 35^ 

1.  Special  indorsement 35^ 

2.  Blank  indorsement 352 

3.  Restrictive  indorsement 354 

4.  Qualified  indorsement ••  3^5 

5.  Conditional  indorsement 3^7 


Vlll  TABLE   OF   CONTENTS. 

PAGE. 

IV    Indorsement  :  methods  and  effect 368 

1.  Indorsement  of  instrument  payable  to  bearer 368 

2.  Indorsement  where  payable  to  two  or  more  persons 371 

3.  Indorsement  where  payable  to  cashier,  etc 373 

4.  Indorsement  where  name  misspelled,  etc 373 

5.  Indorsement  in  representative  capacity 374 

6.  Presumption  as  to  time  of  indorsement 374 

7.  Presumption  as  to  place  of  indorsement 375 

8.  Continuation  of  negotiable  character     375 

9.  Striking  out  indorsement 375 

V.  Transfer  without  indorsement 375 

VI.  Re-transfer  to  prior  party 378 

ARTICLE   V. 
Rights  of  Holder. 

I.  To  sue  and  receive  payment 379 

II.  Holder  in  due  course 386 

1.  Requisites  to  constitute  holder  in  due  course 386 

(a)  Instrument  must  be  complete  and  regular 386 

{If)   Instrument  must  not  be  overdue 387 

(c)  Must  be  taken  in  good  faith  and  for  value 397 

(d)  Must  be  taken  without  notice  of  infirmity  or  defect 400 

(e)  Notice  before  full  amount  paid 415 

2.  Holder  deriving  title  from  holder  in  due  course 417 

3.  Right  of  holder  in  due  course  to  recover  full  amount 419 

4.  Burden  of  proof 422 

III.  Defences  to  negotiable  instruments 425 

ARTICLE  VI. 
Liability  of  Parties. 

I.  Maker:  absolute,  primary  liability;  admissions 446 

1.  Presentment  for  payment  unnecessary 446 

2.  Liability  on  lost  or  destroyed  instrument 446 

3.  Admission  of  existence  and  capacity  of  payee 447 

II.  Acceptor:  absolute,  primary  liability;  admissions 448 

1.  Presentment  for  payment  unnecessary 448 

2.  Admissions  as  to  drawer  and  payee 448 

III.  Drawer;  secondary,  conditional  liability 452 

1.  Conditions:  presentment,  notice,  protest 452 

2.  Admissions  as  to  payee 452 

IV.  Seller  :  warranties 452 

1.  Instrument  genuine  and  what  it  purports  to  be 452 

2.  Title  of  seller 468 

3.  Capacity  of  prior  parties 468 

4.  Knowledge  of  invalidity  or  valuelessness 469 

5.  Indorser  :  instrument  valid  and  subsisting 472 

6.  Liability  of  agent  as  seller 473 


TABLE   OF   CONTENTS.  fx 


V. 


Indorser:  secondary,  conditional  liability 474 

1.  Indorser's  contract  as  seller 4-4 

2.  Indorser's  contract  as  assurer  of  payment 474 

3.  Irregular  indorser 4-5 

4.  Order  of  indorsers'  liability 480 

VI.  Acceptor  for  honor .55 

VII.  Guarantor ,35 

1.  (a)  Does  guaranty-indorsement  by  holder  transfer  title  ? 4S6 

(^)   May  a  guaranty  be  written  above  a  blank  indorsement?..  . .   4S6 

2.  Is  a  transferee  by  guaranty-indorsement  a  holder  in  due  course?  4S7 

3.  What  is  the  contract  of  the  guarantor  ? 4S7 

4.  Is  the  guaranty  transferable  ? 401 

(a)  Is  it  negotiable  ? 4,^1 

{/>)   Is  it  assignable  ? 402 

5.  Defences  available  to  guarantor 404 

ARTICLE  VII. 
Duties  of  Holder:    Presentment  for  Payment. 

I.  Necessity  of  presentment 4qS 

I.   Not  to  charge  acceptor  or  maker 408 

Presentment  necessary  to  charge  drawer  or  indorser 501 

II.  What  constitutes  sufficient  presentment 501 

1.  By  holder  or  authorized  representative cqi 

2.  At  the  proper  time cq. 

3.  At  the  proper  place r  j2 

4.  To  the  proper  person -j-, 

5.  By  exhibiting  the  instrument 520 

III.  When  delay  in  presentment  excused 521 

IV.  When  presentment  dispensed  with ^23 

1.  When  no  right  to  require  or  expect  it 523 

2.  When  impossible 524 

3.  Waiver ^27 

V.  Payment  in  due  course 527 

ARTICLE  VIIL 

Duties  of  Holder:    Notice  of  Dishonor. 

I.  Notice  necessary  to  charge  drawer  or  indorser 528 

II.  What  constitutes  sufficient  notice 528 

1.  By  whom  notice  must  be  given 528 

2.  Form  of  notice 533 

3.  Mode  of  notice 537 

(a)  Personal  delivery 537 

(i)   Mail  delivery   538 

4.  To  whom  notice  may  be  given 540 

5.  Time  within  which  notice  must  be  given 542 

(a)  Where  parties  reside  in  the  same  place 542 

{^)  Where  parties  reside  in  different  places 544 

(c)    Successive  notices 550 

6.  Place  at  which  notice  must  be  given  .    552 


X  TABLE   OF   CONTENTS. 

PAGE. 

III.  When  delay  in  giving  notice  excused 556 

IV.  When  notice  may  be  dispensed  with 558 

1.  When  notice  need  not  be  given  to  drawer , 558 

2.  When  notice  need  not  be  given  to  indorser. .  .  , , 561 

3.  When  notice  to  drawer  or  indorser  dispensed  with 563 

(a)  Due  diligence 5^3 

{l>)  Waiver 5^4 

((-)    Prior  notice  for  non-acceptance 568 

V.  Duties  of  holder:   protest 568 


ARTICLE  IX. 

Discharge  of  Negotiable  Instruments. 

I.  Discharge  of  the  instrument 571 

1.  Payment  and  re-transfer 571 

2.  Cancellation  or  renunciation 579 

3.  Alteration 5S5 

(a)  Effect  of  alteration 585 

{i)   Negligence  of  maker 590 

II.  Discharge  of  party  secondarily  liable 592 

III.  Payment  by  party  secondarily  liable , . . .  599 

IV.  Payment  for  honor 602 

ARTICLE  X. 
Bills  of  Exchange:    Form  and  Interpretation. 

I.  Form 603 

1.  Formal  requisites  generally 603 

2.  The  drawee  or  drawees 603 

{a)  Must  be  certain 603 

(/')   May  be  joint,  but  not  alternative  or  successive 603 

3.  Referee  in  case  of  need 605 

II.  Interpretation 605 


1.  Bill  not  an  assignment  of  funds ••  605 

2.  Inland  and  foreign  bills ^o^ 

3.  Bill  treated  as  promissory  note 609 

ARTICLE  XL 
Acceptance  of  Bills  of  Exchange. 

Form  and  effect "^° 

1.  Acceptance  must  be  in  writing  and  signed  by  drawee f'O 

(a)    Writing  and  signature 610 

(/')    Only  the  drawee  can  accept 611 

(c)    Delivery  necessary 6^2 

2.  Promise  to  accept  must  be  in  writing 613 

3.  Acceptance  by  refusal  to  return  the  bill 617 

4.  Acceptance  of  incomplete  or  dishonored  bill 619 


TABLE   OF   CONTENTS.  xi 

PAGE. 

II.  Kinds  of  acceptances 621 

1 .  General  acceptance 621 

2.  Qualified  acceptance 626 

(a)    Conditional  acceptance 626 

(d)    Partial  acceptance 628 

(c)  Local  acceptance 62S 

(d)  Acceptance  qualified  as  to  time 629 

(e)  Acceptance  by  one  or  more  drawees,  but  not  by  all 630 

3.  Effect  of  qualified  acceptance 630 

(a)    Holder  may  refuse  qualified  acceptance 630 

(d)   Qualified    acceptance  discharges    non-assenting    antecedent 

parties 631 

ARTICLE  XII. 

Presentment  of  Bills  of  Exchange  for  Acceptance. 

I.  In  what  cases  presentment  for  acceptance  necessary 632 

II.  What  constitutes  sufficient  presentment 637 

III.  When  presentment  for  acceptance  excused 641 

IV.  Effect  of  dishonor  of  bill  presented  for  acceptance 641 

ARTICLE    XIII. 

Protest  of  Bills  of  Exchange. 

I.  Wh.\t  instruments  must  be  protested 643 

II.  What  constitutes  sufficient  protest 643 

III.  By  whom  protest  should  be  made 648 

ARTICLE    XIV. 

ACCEPT.A.NCE    FOR     HONOR « 65 1 

ARTICLE    XV. 

P.\YMENT    FOR    HONOR 658 

ARTICLE    XVL 
Bills  in  a  Set 66i 

ARTICLE    XVII. 

Promissory  Notes  and  Checks. 

I.  Promissory  notes 666 

1.  Origin  and  history   . .    666 

2.  Form  and  interpretation 667 

3.  Non-negotiable  notes , 667 

II.  Checks 673 

1.  Check  distinguished  from  bill  of  exchange 673 

2.  Presentment :  effect  of  delay  upon  drawer's  liability 676 


xii  TABLE  OF   CONTENTS. 


PAGE. 


3.  Certification  :  effect  upon  drawer's  liability 682 

4.  A  check  not  an  assignment  of  funds 685 

5.  Liability  of  drawee  to  drawer  for  wrongful  dishonor 688 


Index - 691 


TABLE  OF  CASES  REPORTED. 


^\  Where  d  is  prefixed  to  the  page  number,  the  case  is  digested  or  but  briefly 
reported  in  the  text;  where  n  is  prefixed  to  the  page  number,  the  case  is  digested 
in  a  note. 


PAGE. 

Adams  v.  King 251 

Agavvam  Nat.  Bank  v.  Downing.  573 
Alabama    Coal    Mining    Co.    v. 

Brainard 273 

Almich  V.  Downey 285 

American    Express  Co.  v.  Pinck- 

ney d.  301 

American    Nat.     Bank    v.    Junk 

Bros 563 

American  Nat.  Bank  v.  Sprague.  245 

Anderton  v.  Shoup 304 

Anon  (12  Mod.  447) 604 

Armstrong  v.  National  Bank..    .  263 

Atlantic  Nat.  Bank  v.  Davis 6S8 

Aymar  v.  Beers «.  636 

Bank  of  Commerce  v.  Chambers.  554 
Bank    of     England    v.  Vagliano 

Bros 127,  /I.  266 

Bank  of  Geneva  v.  Hewlett 553 

Bank  of  Michigan  v.  Ely 613 

Bank  of  Orleans  v.  Whittemore.  515 

Bank  of  the  Republic  v.  Millard.  685 

Bank  of  Rochester  v.  Gray 568 

Barnes  v.  Vaughan 5 14 

Bartlett  v.  Tucker 306 

Bartlett  v.  Robinson      </.  552 

Baxendale  v.  Bennett 280 

Belden  v.  Hann.  . . ; 352 

Berry  v.  Robinson 236 

Bishop  v.  Curtis 379 

Bissell  V.  Dickerson 419 

Bitzer  v.  Wagar 342 

Blake  v.  Coleman 176 

Blake  v.  McMillen 519 

Blenn  v.  Lyford 600 

Boehm  v.  Garcias 630 

Bolles  v.  Stearns ....  373 

Brick  v.  Freehold  Nat.  Bank....  598 

Bristol  V.  Warner    325 

Brook  &  Co.  V.  Vannest 359 

Brooks  V.  Struthers n.  210 

Brooks  V.  Higby 512 

Brown  v.  Butchers,  etc.,  Bank..  164 

Brown  v.  Curtiss 487 


Brown  v.  Jordhal 

Brown  v.  Montgomery.    ... 

Brown  v.  Reed 

Brush       v.     Administrators 

Reeves .... 

Bull  v.  Bank  of  Kasson. .  . .  . 


Campbell  Printing,  etc.,  Co.  v. 
Jones d. 

Cape  Ann  Nat.  Bank  v.  Burns.  . 

Carlon  v.  Kenealy 

Carnwright  v.  Gray 

Carter  v.  Union  Bank 

Casco  Nat.  Bk.  v.  Clark 

Cathell  v.  Goodwin 

Caulkins  v.  Whister 

Cayuga,  etc..  Bank  v.  Hunt.... 

Central  R.  v.  First  Nat.  Bk.    ... 

Challiss  V.  McCrum 

Chamberlain  v.  Young 

Chanoine  v.  Fowler 

Chapman  v.  Keane 11. 

Chapman  v .  Rose 

Cheever  v.  Pittsburgh,  etc.,  R. . . 

Chester  v.   Dorr 

Chicago  Ry.  Co.  v.  Merchants' 
Bank 

Chipman  v.  Foster 

Chrysler  v.  Renois 

Citizens'  Nat.  Bk.  v.  Piollet 

Clark  V.  Pease 

Clarke  v.  Patrick 

Glutton  V.  Attenborough d. 

Cock  V.  Fellows 

Commonwealth  v.  Butterick  .  .d. 

Continental  N.  B.  v.  Townsend  . 

Continental  Life  Ins.  Co.  v.  Bar- 
ber. .    . . 

Cooke  V.  Horn 

Cooper  v.  Dedrick .... 

Cota  v.  Buck 

Coulter  v.  Richmond 

Crist  V.  Crist d. 

Cromwell  v.  Hewitt 

Crouch  V.  Credit  Foncier d. 


PAGE. 

283 
469 
591 

475 
221 


301 

590 
2o3 
668 
648 

317 
560 
289 
646 

357 
461 
249 

523 
531 
435 
407 

3S3 

209 

317 
223 
246 
425 

354 
166 
342 
174 

387 

59^' 
202 
492 
i8i 
478 
3Sr 
672 
341 


XIV 


TABLE   OF   CASES    REPORTED. 


Cruchley  V.   Clarance d. 

Currier  v.   Lockwood 

Curtis  V.  Sprague 

Dabney  v.  Stidger 

Daniels  v.  Hammond n. 

Dart  V.  Sherwood   

Davies  v.  Wilkinson 

Davis  V.  Garr 

Davis  V.  Reilly 

Davis    Sewing    Machine    Co.    v. 

Best 

De  la  Torre  v.  Barclay. .      

Dennistoun  v.  Stewart 

De  Witt  V.  Perkins 

Dodge  V.  Emerson 

Dresser  v.  Missouri,  etc.,  Co. . . . 

Duffield  v.  Johnston (/. 

Dunavan.  v.  Flynn d. 

D wight  v.  Pease  

Easterly  v.  Barber 

Eldred  v.  Malloy 

Elgin  City  Banking  Co  v.  Zelch. 

Erwin  v.  Downs 

Evans  v.  Gee d. 

Everson  v.  Gere '/. 

Fall  River  Union  Bank  v.  Willard. 

Farnsworth  v.  Allen 

First  Nat.  Bank  v.  Farneman. .  . 
First  Nat.  Bank  v.  Slaughter   . .  . 

First  Nat.  Bank  v.  Slette 

Floyd  Acceptances,  The d. 

Folger  v.  Chase 

Fox  v.  Citizens'  Bank 

Frazier  v.  Massey 

Freeman  v.  Exchange  Bank.  .  .  . 
Freeman's  Nat.  Bk.  v.  Savery. .  n. 
Funk  V.  Babbitt d. 

Gardner  v.  Maynard 

Gay  v.  Rooke 

Geary  v.  Physic 

Goodman  v.  Harvey d. 

Goodwin  v.  Robarts    ■ 

Gordon  v.  Anderson 

Gove  V.  Vining 

Gowan  v.  Jackson 

Grange  v.  Reigh 

Gregg  V.  Beane 

Grey  v.  Cooper 

Grocers'  Bank  v.  Penfield 

Hall  v.  Toby d. 

Hamilton  v.  Vought 

Hammett  v.  Brown d. 

Hannum  v.  Richardson 

Harrisburg  Trust  Co. v.  Shufeldt, 
Harrison  v.  Nicollet  Nat.   Bank, 

Harrison  v.  Ruscoe n. 

Hart  V.  Smith  

Harvey  v.  Cane d. 


PAGE. 
297 
170 

268 

407 
302 
22S 
261 

386 
56S 
643 

397 
195 
415 
243 
612 

371 

482 
243 
347 
468 
352 
493 

638 
509 
551 
231 
21S 
320 

349 
412 
321 
364 
406 
272 

599 
164 
161 
400 
151 
255 
564 
55S 
676 
677 
452 
339 

345 
400 
169 
466 
498 
673 
531 
234 
297 


PAGE. 

Hastings  v.  Thompson .........  212 

Hatcher  v.  Stalworth 629 

Hays  V.  Hathorn 382 

Head  v.  Hornblower 682 

Hegeman  V.  Moon d.  168 

Herrick  V.  Bennett 236 

Herring  v.  Woodhull 348 

Heuertematte  V.  Morris 336,  451 

Hillsdale  College  v.  Thomas 275 

Hobbs  V.  Straine 537 

Hodges  V.  Shuler 233 

Hoffman  V.  Bank 335 

Hogue  V.  Williamson     225 

Holbrook  v.  Payne 605 

Hook  v.  Pratt. .' 361 

Hopps  &  Co.  v.  Savage 619 

Horn  V.  Newton  City  bank 585 

Hotchkiss  V.  National  Banks.. (/.  405 

Hoyt  V.   Lynch I73 

Hughes  V.'  Kiddell, 350 

Hull  V.  Myers 561 

Hunter  V.  Wilson 334 

Hussey  v.  Winslow d.  169 

Ives  V.  Farmers'  Bank 293 

Jackson  v.  Hudson 603 

James  V.  Wade 556 

Jarvis  v.  St.  Croix  Mfg.  Co 549 

Jenkins  v.  Mackenzie 592 

Jennings  V.   Roberts n.  531 

Johnson  v.  Barrow 367 

Johnson  v.  Conklin 447 

Johnson  v.  Haight 504 

Johnson  v.  Mitchell 369 

Jones  V.  Gordon d.  398 

Jordan  v.  Tate 238 

joslyn  V.  Eastman 593 

Josselyn  v.  Lacier n.  1S3 

Kelley  V.  Hemmingway 241 

Kelley  v.  Whitney, 394 

King  v.  Ellor d.  174 

King  v.  Hurley 533 

Kinyon  v.  Wohlford 279 

Laird  v.  State 219 

Lancaster  v.  Baltzell 322 

Lancey  v.  Clark 578 

Lane  v.  Stacey 485 

Larkin  v.  Hardenbrook 579 

Leavitt  v.  Putnam 356 

Leonard  v.  Mason 228 

Lewis  v.  Clay 440 

Light  V.  Kingsbury 237 

Lindenberger  v.  Beall 544 

Linn  v.  Horton 550 

Little  V.  Slackford d.  175 

Lomax  v.  Picot .d.  367 

Long  V.  Stephenson 474 

Losee  v.  Dunkin 396 

Lyndonville     National    Bank    v. 

'Fletcher    582 


TABLE   OF   CASES   REPORTED. 


Lysaght  v.  Bryant 

McGregory  v.  McGregory 

Mcintosh  V.  Lytle 

Madison  Square  Bank  v.  Pierce.. 

Market  and  Fulton  N.  B.  v.  Sar- 
gent  

Markey  v.  Corey 

Matteson  v.    Moulton 

Maynard  v.  Mier 

Mears  v.  Graham d. 

Mehlberg  v.  Tisher d. 

Merritt  v.  Benton 

Meyer  v.  Richards 

Meyer  &  Co.  v.  Decroix,  Verley 
et  cie  

Miller  v.  Austin 

Miller  v.  Poage       

Mills  V.  Bank  of  U.  S 

Minot  V.  Russ 

Montgomery  v.  Elliott 

Moore  v.  Coffield 

Moore  v.  Cashing 

Morris  v.  Husson d. 

Musselman  v.   Oakes 

National  Bank  of  Commonwealth 
V.  Law     

National  Bank  of  Michigan  v. 
Green 

National  Park  Bank  v.  Ninth 
Nat.  Bk 

Newark,  etc.,  Mfg.  Co., v.  Bishop. 

Nixon  V.  Palmer d. 

Noll  V.  Smith 

Norris  v.  Soloman n. 

Noxon  V.  Smith d. 


O'Callaghan  v.  Sawyer 

Ocean  Nat.  Bank  v.  Fant 

Ohio    Life    Ins.,   etc.,  Co.  v.  Mc- 

Cague 

Oothout  V.  Ballard 

Osborn  v.  Hawley 

Osgood  V.  Artt 


Page  V.    Cook 

Page  V.   Morrel 

Pardee  v.   Fish 

Parker  v.  Kellogg   

Parker  v.  Plymell 

Parker  v.  Reddick 

Parsons  v.  Jackson 

Pasmore  v.  North 

Pearce  v.  Langht 

Petit  V.  Benson , 

Peto  V.  Reynolds n. 

Pier  V.  Heinrichshoffen 

Plato  V.  Reynolds 

Post  V.  Kinzua  Hemlock  Ry.  Co. 

Power  V.  Finnic 

Prescott  N.  B.  v.  Butler    

Prouty  V.  Roberts 

Putnam  v.  Crymes 


530 
446 

248 

574 

291 

343 
617 
217 
300 
2S3 
420 
452 

621 

182 

534 
6S2 

499 
524 

480 
552 
25S 


405 
420 

44S 
510 
321 
590 
174 
261 

387 
520 

532 
475 
230 

375 

239 

2S8 
222 

517 
199 

507 
198 

286 

539 
628 
271 
521 
632 
193 
354 
472 
418 
263 


Putnam  v.  Schuyler. 


Railroad  Co.  v.  National  Bank.. 

Ranger  v.  Cary d. 

Ransom  v.  Mack d. 

Reamer  v.  Bell ^ 

Redman  v.  Adams 

Reg.  V.  Bartlett .d. 

Reg.  V.  Harper 

Rice  V.  Stearns 

Richardson  v.  Ellett (/. 

Rider  v.  Taintor 

Riker  v.  Sprague  Mfg.  Co 

Robertson  v.  Kensington n. 

Robinson  v.  Ames 

Rockville  Bank  v.  Holt 

Ruff  V.  Webb d. 

Sackett  v.  Palmer d. 

Saloman    v.     Pfeister     &    Vogel 

Leather  Co 

Saunders  v.  McCarthy 

Schmittler  v.  Simon 

Schmitz  V.  Hawkeye,  etc.,  Co.d. 

Schofield  v.  Bayard 

Scott  V.  Calkin 

Sharpe  v.  Drew 

Shaw  V.  Camp 

Shaw  V.  McNeill 

Shaw  V.  Smith 

Sheldon  v.  Benham 

Shipman  v.  Bank d. 

Siegel     V.    Chicago    Trust,    etc., 

Bank 

Simon  v.  Merritt 

Simpson  v.  Griffin 

Simpson  v.  Turney 

Slade  V.  Mutrie 

Smith  V.  Allen ,    

Smith  V.  Clopton 

Smith  V.  Crane 

Smith  V.  Kendall 

Smith  V.  Poillon 

Spear  v.  Pratt 

Stacy  V.  Kemp. 

Stafford  v.  Yates 

Stagg  V.  Elliott d. 

Stainback  v.  Bank  of  Virginia.  .  . 
Stapleton   v.  Louisville   Banking 

Co 

Stevens  v.   Androscoggin  Water 

Power  Co 

Stewart  v.  Eden 

Stinson  v.  Lee 

Stockwell  V.  Bramble 

Stoddard  v.  Burton 

Stoddard  v.  Kimball 

Sullivan  v.  Rudisill 

Sussex  Bank  v.  Baldwin 

Tatam  t.  Haslar 

Taylor  v.  Dobbins 

Taylor  v.  Snyder «. 


PAGE. 

494 

327 
374 
563 
351 

188 

174 
162 

365 
301 
368 
203 
36S 
633 
594 
175 

244 

536 
207 
1S3 
r68 

655 
353 
637 
240 
566 
252 
53S 
267 

190 

417 
421 

542 
580 
167 

197 
20  r 
667 

545 
610 
338 
53^ 
320 

547 
215 

626 

54<J 
517 
620 

57f 
337 
5S9 
501 

422 
163 
516 


XVI 


TABLE  OF  CASES  REPORTED, 


Toby  V.  Maurian 518 

Tombeckbee  Bank  v.  Dumell. . .  639 

Troy  City  Bank  v.  Lauman 625 

True  V.  Fuller 491 

Trust  Co.  V.  National  Bank 346 

Turner  v.  Iron  Chief  Mining  Co.  504 

Union  Nat.  Bank  v.  Marr's  Adm'r.  557 

Valley  Nat.  Bk.  v.  Crovvell 229 

Violett  V.  Patton d.  29b 

Wait  V.  Thayer n.  406 

Wiilker   V.  Bank d.  631 

Walker  v.  Ebert 431 

Wallace  v.  Agry     «.  636 

Walsh  V.  Blatchley 663 

Walton  V.  Williams 611 

Waring  v.  Belts ...  524 

Watrous  V.  Halbrook 270 


Watson  V.  Evans 

Wellington  v.  Jackson d. 

Wells  V.  Brigham. .  • d. 

Wheeler  v.  Webster  d. 

White  V.  Cashing 

White  V.  Madison 

White    Sewing  Machine    Co.    v. 

Dakin . .    . . .  .d. 

Williams    v.     Tishomingo    Sav. 

Inst 

Wilson  V.  Campbell d. 

Wintermute  V.  Post d. 

Winthrop  v.  Pepoon 

Witte  V.  Williams 

Witty  V.  Michigan,  etc.,  Ins.  Co. 

Worden  v.  Dodge 

Worth  V.  Case 

Worthington  v.  Cowles 


Yale  V.  Ward. 


PAGE 

259 

324 
193 
272 

177 
311 

588 

468 
210 
630 
641 

254 
298 
I  So 
277 
473 

608 


NEGOTIABLE  INSTRUMENTS: 

STATUTES,  CASES  AND  AUTHORITIES. 


PART  I. 
STATUTES. 


AMERICAN 
NEGOTIABLE  INSTRUMENTS  LAW. 


Lawsof  New  York,  1S97,  Chapter  612;  1898,  Chapter 336  {Text). 

Laws  of  Colorado,  1897,  Chapter  239. 

Laws  of  Connecticut,  1897,  Chapter  74. 

Laws  of  Florida,  1897,  No.  10,  Chapt.er  4524. 

Laws  of  Maryland,  1898,  Chapter  119. 

Laws  of  Virginia,  1897-98,  Chapter  866, 

Laws  of  Massachusetts,   i   Rev.  Laws  (1902),  p.  628  (Act   1898, 

Chapter  533). 
Laws  of  Dist.  of  Columbia,  1899,  30  U.  S.  St.  at  L.,  p.  785, 
Laws  of  North  Carolina,  1899,  Chapter  733. 
Laws  of  North  Dakota,  1899,  Chapter  113. 
Laws  of  Oregon,  1899,  Page  18. 
Laws  of  Rhode  Island,  1899,  Chapter  674. 
Laws  of  Tennessee,  1899,  Chapter  94. 
Laws  of  Utah,  1899,  Chapter  Zt,. 
Laws  of  Washington,  1899,  Chapter   149. 
Laws  of  Wisconsin,  1899,  Chapter  356. 
Laws  of  Pennsylvania,  1901,  Chapter  162, 
Laws  of  Ohio,  1902. 
Laws  of  New  Jersey,  1902,  Chapter  184. 


EXPLANATORY  NOTE. 

The  text  is  that  of  the  New  York  Negotiable  Instruments  Law. 
The  Act  as  passed  in  other  States  is  identical  except  as  to  section 
numberings  and  headings.  The  section  numbers  in  brackets  at  the 
right  of  the  headings  and  elsewhere  are  those  of  the  other  States 
and  are  uniform  in  those  States  from  [§i]  to  [§189],  inclusive.  The 
notes  in  brackets  are  those  of  the  draftsman  (J.  J.  Crawford,  Esq.), 
as  they  appeared  in  the  draft  printed  by  the  Commissioners  on 
Uniformity  of  Laws.  The  reference,  "Cases,  pp.  x-x,  "  is  to  the 
"Cases  and  Authorities"  contained  in  this  volume.  The  reference 
"  Chalmers  "  is  to  Chalmers'  Bills  of  Exchange  Act  (5th  ed.), London, 
1896.  The  reference  to  Daniel  on  Negotiable  Instruments  is  to 
the  4th  Edition,  New  York,  1891. 


THE   NEGOTIABLE    INSTRUMENTS   LAW. 


Laws  of  New  York,  1897,  Chapter  612. 

An  act  in  relation  to  negotiable  instruments,  constituting 
chapter  fifty  of  the  general  laws.  [Became  a  law  May  19, 
1897.] 

The  People  of  the  State  of  New  York,  represented  in  Senate  a7icl 
Assembly,  io  enaet  as  follows  : 

THE  NEGOTIABLE  INSTRUMENTS  LAW. 

''ARTICLE  I.  General  provisions.     (§§  1-7.) 

II.  Form  and  interpretation  of  negotiable  Instruments.  (§§20-42.) 

[§§  1-23.] 
III.  Consideration.     (§§  50-55.)     [§§  24-29.] 
I'^^,  Negotiation.     (§§  60-80.)     [§§  30-50.] 

V.  Rights  of  holder.     (§§  go-98)     [§§  51-59.] 
VI.  Liabilities  of  parties.     (§§  110-119.)     [§§  60-69.] 
VII.  Presentment  for  payment.     (§§  130-148.)     [§§  70-SS.] 
VIII.  Notice  of  dishonor.     (§§  160-189.)     [§§  Gq-iiS.] 
IX.  Discharge  OF  negotiable  instruments.  (§§  200-206.)    [§§119-125.] 
X.  Bills   of  exchange;     form  and  interpretation.     (§§210-215.') 
[§§  126-131.] 
XI.  Acceptance.     (§§  220-230.)     [§§  132-142.] 
XII.  Presentment  for  accept.\nce.     (§§  240-248.)     [§§  143-151.] 
XIII.  Protest.     (§§  260-268.)     [§§  152-160.] 
XIV.  Acceptance  for  honor.     (§§  280-290.)     [§§  161-170.] 
XV.  Payment  for  honor.     (§§  300-306.)     [§§  171-177-] 
XVI.  Bills  in  a  set.     (§§  310-315.)     [§§  178-183.] 
XVII.  Promissory  notes  and  checks.     (§§  320-325.)     [§§  184-189.] 
XVIII.  Notes  given  for  patent  rights  and   for  a  speculative  consid 
eration.     (§§  330-332.) 
XIX.  Laws  repealed,  when  to  take  effect.     (§§  340-341.) 

*  In  the  other  States  the  act  is  divided  as  follows:  Title  I.  Negotiable  Instru- 
ments in  General  (Arts.  I  to  VIII);  Title  II.  Bills  of  Exchange  (Arts  I  to  VIT) 
Title  III.  Promissory  Notes  and  Checks. 

[5] 


6  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

ARTICLE  1. 

GENERAL  PROVISIONS. 
*Section   i.  Short  title. 

2.  Definitions  and  meaning  of  terms. 

3.  Person  primarily  liable  on  instrument. 

4.  Reasonable  time,  what  consti':utes, 

5.  Time,  how  computed;   when  last  day  falls  on  holiday. 

6.  Application  of  chapter. 

7.  Rule  of  law  merchant;  when  governs. 

t>  I,  Short  title. 

This   act   shall   be  known  as  the  negotiable  instruments 

Jaw.  {a) 


{a)  It  will  be  observed  that  the  Act 
applies  only  to  negotiable  instruments. 
Non-negotiable  bills  and  notes  are  still 
governed  by  the  law  merchant,  so  far 


as  they  are  anything  more  than  com- 
mon-law  contracts.      See  §  320   [184], 

post. 


I  2.  Definitions  and  meaning  of  terms. 

In  this  act,  unless  the  context  otherwise  requires : 

"Acceptance  "  means  an  acceptance  completed  by 
delivery  or  notification. 

"Action  "  includes  counter-claim  and  set-off. 

"  Bank  "  includes  any  person  or  association  of  persons 
carrying  on  the  business  of  banking,  whether  incorpo- 
rated or  not. 

"  Bearer  "  means  the  person  in  possession  of  a  bill  or 
note  which  is  payable  to  bearer. 

"  Bill  "  means  bill  of  exchange,  and  "  note  "  means 
negotiable  promissory  note. 

"  Delivery  "  means  transfer  of  possession,  actual  or 
constructive,  from  one  person  to  another. 

"  Holder  "  means  the  payee  or  indorsee  of  a  bill  or 
note,  who  is  in  possession  of  it,  or  the  bearer  thereof. 

"  Indorsement  "  means  an  indorsement  completed  by 
delivery. 

"  Instrument  "  means  negotiable  instrument. 

"  Issue  "  means  the  first  delivery  of  the  instrument^ 
complete  in  form  to  a  person  who  takes  it  as  a  holder. 

"  Person  "  includes  a  body  of  persons,  whether  incor- 
porated or  not. 

*§  190  to  §  196  in  Colorado;  no  section  numbers  in  the  other  States. 


FORM   AND   INTERPRETATION.  7 

"  Value  "  means  valuable  consideration. 
*'  Written  "  includes  printed,  and  "  writing  "  includes 
print. 

See  Bills  of  Exchange  Act,  section  2. 

§  3.  Person  primarily  liable  on  instrument. 

The  person  "  primarily  "  liable  on  an  instrument  is  the 
person  who  by  the  terms  of  the  instrument  is  absolutely 
required  to  pay  the  same.  All  other  parties  are  "  secondar- 
ily "  liable. 

§  4.  Reasonable  time,  what  constitutes. 

In  determining  what  is  a  "reasonable  time"  or  an 
"  unreasonable  time  "  regard  is  to  be  had  to  the  nature  of 
the  instrument,  the  usage  of  trade  or  business  (if  any)  with 
respect  to  such  instruments,  and  the  facts  of  the  particular 
case. 

See  Bills  of  Exchange  Act,  sections  40,  45,  74,  86. 

§  5.  Time,  how  computed  ;  when  last  day  falls  on  holiday. 

Where  the  day,  or  the  last  day,  for  doing  any  act  herein 
required  or  permitted  to  be  done  falls  on  Sunday  or  on  a 
holiday  (a),  the  act  may  be  done  on  the  next  succeeding 
secular  or  business  day.  (d) 

(a)  See  Appendix  A,  post,  p.  83.  1  Y.)   205.     See   §    145    [85].     See  N,  Y. 

{b)  See  Salter  v.  Burt,  20  Wend.  (N.  I  Statutory  Construction  Law,  §§  26,  27. 

§  6.  Application  of  chapter. 

The  provisions  of  this  act  do  not  apply  to  negotiable 
instruments  made  and  delivered  prior  to  the  passage  hereof. 

§  7.  Law  merchant ;  when  governs. 

In  any  case  not  provided  for  in  this  act  the  rules  of  the 
law  merchant  {a)  shall  govern. 

{a)  Cases,  pp.  132-160. 

ARTICLE  II. 

FORM  AND  INTERPRETATION. 

*Section   20.  Form  of  negotiable  instrument. 

21.  Certainty  as  to  sum;  what  constitutes. 

*§  [i]  to  i^  [23]  in  the  other  States. 


8  THE   NEGOTIABLE    INSTRUMENTS   LAW. 

Section  22.   When  promise  is  unconditional. 

23.  Determinable  future  time;  what  constitutes. 

24.  Additional  provisions  not  affecting  negotiability. 

25.  Omissions;  seal;  particular  money. 

26.  When  payable  on  demand. 

27.  When  payable  to  order. 

28.  When  payable  to  bearer. 

29.  Terms  when  sufficient. 

30.  Date  of;  presumption  as  to. 

31.  Ante-dated  and  post-dated. 

32.  When  date  may  be  inserted. 

33.  Blanks,  when  may  be  filled. 

34.  Incomplete  instrument  not  delivered. 

35.  Delivery;   when  effectual;   when  presumed, 

36.  Construction  where  instrument  is  ambiguous. 

37.  Liability  of  persons  signing  in  trade  or  assumed  name, 

38.  Signature  by  agent;  authority;  how  shown. 

39.  Liability  of  person  signing  as  agent,  et  cetera. 

40.  Signature  by  procuration;  effect  of. 

41.  Effect  of  indorsement  by  infant  or  corporation. 

42.  Forged  signature;  effect  of. 

§  20.  Form  of  negotiable  instrument.  r§  i] 

An  instrument  to  be  negotiable  must  conform  to  the  f ol  - 
lowing  requirements : 

1.  It  must  be  in  writing  {a)  and  signed  by  the  maker 
or  drawer,  (l?) 

2.  Must  contain  an  unconditional  (r)  promise  (d)  or 
order  (r)  to  pay  a  sum  certain  (/)  in  money  (g); 

3.  Must  be  payable  on  demand  {/i),  or  at  a  fixed  or 
determinable  future  time  (/) ; 

4.  Must  be  payable  to  order  {k)  or  to  bearer  (/):  and 

5.  Where  the  instrument  is  addressed  to  a  drawee,  he 
must  be  named  or  otherwise  indicated  therein  with 
reasonable  certainty.  (;;/) 

[Note. —  See  Bills  of  Exchange  Act,  sections  3,  4,  5,  6.]     For  definition  of 
bill,  note,  check,  see  §  210  [126],  320  [184],  321  [185], /^jA 


(a)  See    §     2     [General    Provisions]. 
Cases,  pp.  161-162. 

(^)     Cases,  pp.  162-164. 

(c)  See  §  22  [3].     Cases,  pp.  176-195. 

(d)  Cases,  pp.  164-172. 

(e)  Cases,  pp.  I73-I75- 

(/)  See  §  21  [2].     Cases,  pp.  195-217- 
(^)    Cases,  pp.  218-227. 


(k)  See  I  26  [7]. 

(/)  See  §  23  [4]. 

(X')  See  §  27  [8]. 

(/)  See  §28  [9]. 


Cases,  pp. 234-237 
Cases,  pp.  238-247 
Cases,  pp.  248-262 
Cases,  pp.  263-270, 


(m)  See  §  210  [126].  Cases,  pp.  270- 
275.  [Peto  v.  Reynolds,  9  Exch.  410- 
Ball  V.  Allen,  15  Mass.  433.] 


FORM   AND   INTERPRETATION.  9 

§  21.  Certainty  as  to  sum  ;  what  constitutes.  [§  2] 

The  sum  payable  is  a  sum  certain  (/r)  within  the  meaning 
of  this  act,  although  it  is  to  be  paid : 

1.  With  interest ;  (^/;)  or 

2.  By  stated  installments ;  (r)  or 

3.  By  stated  installments,  with  a  provision  that  upon 
default  in  payment  of  any  installment  or  of  interest,  the 
whole  shall  become  due  ;  id)  or 

4.  With  exchange,  whether  at  a  fixed  rate  or  at  the 
current  rate ;  {e)  or 

5.  With  costs  of  collection  or  an  attorney's  fee,  in  case 
payment  shall  not  be  made  at  maturity.  (/) 

[Note.  —  See  Bills  of  Exchange  Act,  section  9. J 


(«)  Cases,  pp.  195-199. 
{b)  Cases,  pp.  199-202. 

(c)  Cases,  pp.  202-208. 

(d)  Cases,  pp.  208-211. 
{e)   Cases,  pp.  212-215. 

(/)  Cases,  pp.  215-217.     [Nat.   Bank 
V.  Sutton  Mfg.   Co.,  6   U.   S.  App.  312, 


331;  52  Fed.  Rep.  igi;  Montgomery  v. 
Crossthwait,  90  Ala.  553;  Bank  \- 
Marsh  (Iowa),  56  N.  W.  Rep.  458; 
Dorsey  v.  Wolff,  142  III,  589;  Trader 
V.  Chidester,  41  Ark.  242;  Stapleton  v, 
Louisville  Banking  Co.  (Ga.),  23  S.  E. 
Rep.  81.] 


§  22.  When  promise  is  unconditional.  [§  3] 

An  unqualified  order  or  promise  to  pay  is  unconditional 
within  the  meaning  of  this  act,  though  coupled  with : 

1.  An  indication  of  a  particular  fund  out  of  which 
reimbursement  is  to  be  made,  or  a  particular  account  to 
be  debited  with  the  amount ;  {a)  or 

2.  A  statement  of  the  transaction  which  gives  rise  to 
the  instrument,  {b) 

But  an  order  or  promise  to  pay  out  of  a  particular  fund  is 
not  unconditional,  {c) 

[Note. — See  Bills  of  Exchange  Act,  section  3,  subdivision  3.]  Cases,  pp. 
176-195- 

{a)  Cases,  pp.  183-189.  I  (c)  Cases,  pp.  180-183. 

(b)  Cases,  pp.  190-195.  | 

§  23.  Determinable  future  time  ;  what  constitutes.  [§  4] 

An  instrument  is  payable  at  a  determinable  future  time, 
within  the  meaning  of  this  act,  which  is  expressed  to  be 
payable : 

I.  At  a  fixed  period  after  date  or  sight ;(^r)  or 


10 


THE   NEGOTIABLE   INSTRUMENTS    LAW. 


2.  On  or  before  a  fixed  or  determinable  future  time 
specified  therein ;  {b)  or 

3.  On  or  at  a  fixed  period  after  the  occurrence  of  a 
specified  event,  which  is  certain  to  happen,  though  the 
time  of  happening  be  uncertain,  [c) 

An  instrument  payable  upon  a  contingency  is  not  negoti- 
able, and  the  happening  of  the  event  does  not  cure  the 
defect,  {d) 

[Note.  —  See  Bills  of  Exchange  Act,  section  11.] 


{a)     Cases,  pp.  238. 

{b)  Cases,  pp.  238-240.  [Mattison 
V.  Marks,  31  Mich.  421;  Smith  v.  Ellis, 
29  Me.  422;  Riker  v.  Sprague  Mfg.  Co., 
14  R.  I.  402;  Kiskadden  v.  Allen,  7 
Colo.  206;    Jordan  v.  Tate,  19  Ohio  St. 


586;  First  Nat.  Bank  v.  Skeen,  29  Mo. 
App.  115;  Daniel  on  Neg.  Inst.,  sec- 
tions 41-4S.] 

{c)  Cases,  p.  240-241.  [Byles  on 
Bills,  95.] 

(d)    Cases,  pp.  176-183. 


§  24.  Additional  provisions  not  affecting  negotiability.      [§  5] 

An  instrument  which  contains  an  order  or  promise  to  do 
any  act  in  addition  to  the  payment  of  money  is  not  negoti- 
able, {a)  But  the  negotiable  character  of  an  instrument 
otherwise  negotiable  is  not  affected  by  a  provision  which: 

1.  Authorizes  the  sale  of  collateral  securities  in  case 
the  instrument  be  not  paid  at  maturity ;  {b)  or 

2.  Authorizes  a  confession  of  judgment  if  the  instru- 
ment be  not  paid  at  maturity ;  {c)  or 

3.  Waives  the  benefit  of   any   law   intended  for   the 
advantage  or  protection  of  the  obligor  ;(<:/ )  or 

4.  Gives  the  holder  an  election  to  require  something 
to  be  done  in  lieu  of  payment  of  money,  (e) 

But  nothing  in  this  section  shall  validate  any  provision  or 
stipulation  otherwise  illegal. 


{a)     Cases,  pp.  22S-229. 

(b)  Cases,  pp.  229-230.  [Perry  v. 
Bigelovv,  128  Mass.  129.] 

{c)  Cases,  pp.  230-231  [Osborn  v. 
Hawley,  19  Ohio,  130.  Contra^ 
Sweeney  v.  Thickstun,  77  Pa.  St.  131.] 


((/)  Cases,  pp.  231-232.  [Zimmer- 
man V.  Anderson,  67  Pa.  St.  421.] 

(,)  Cases,  pp.  233-234.  [Hodges  v. 
Schuler,  22  N.  Y.  114;  Hostetter  v. 
Wilson,  36  Barb.  307.] 


§  25    Omissions  ;  seal ;  particular  money.  [§  6] 

The  validity  and  negotiable  character  of  an  instrument 
are  not  affected  by  the  fact  that : 
I.   It  is  not  dated;  {a)  or 


FORM   AND    INTERPRETATION.  II 

2.  Does  not  specify  the  value  given,  or  that  any  value 
has  been  given  therefor ;  (a)  or 

3.  Does  not  specify  the  place  where  it  is  drawn  or  the 
place  where  it  is  payable ;  (a)  or 

4.  Bears  a  seal ;  {d)  or 

5.  Designates  a  particular  kind  of  current  money  in 
which  payment  is  to  be  made,  {c) 

But  nothing  in  this  section  shall  alter  or  repeal  any  statute 
requiring  in  certain  cases  the  nature  of  the  consideration  to 
be  stated  in  the  instrument,  (d) 

[Note.  —  See  Bills  of  Exchange  Act.  section  3,  subdivision  (4).] 


(a)  Cases,  p.  283.  See  §  32  [13], 
post.  "  Under  most  of  the  conti- 
nental Codes  it  is  essential  that  a  bill 
should  be  dated."  Chalmers'  Bills  of 
Exchange  Act  (5th  ed.),  p.  13.  And 
state  a  consideration.  /i>.,  p.  14.  And 
in  some  it  is  necessary  that  a  bill  should 
be  payable  in  a  place  different  to  that 
in  which  it  is  made.  "  No  distance  is 
fixed  by  the  codes,  but  it  has  been  de- 
cided that  the  place  of  payment  must 
be  so  far  distant  from  the  place  of 
issue  that  there  may  be  a  possible  rate 


of  exchange  between  the  two."  Id., 
P-  15- 

(i)  Cases,  pp.  283-284.  [This  is  the 
rule  in  many  states  by  statute.  See 
Daniel  on  Neg.  Inst.,  section  33.  See 
also  Weeks  v.  Esler,  143  N.  Y.  374.] 

(c)  Cases,  pp.  218-227.  [Daniel  on  Neg. 
Inst.,  section  56  et  seq.,  and  cases  cited.] 

{d)  See  New  York  Neg.  Inst.  L., 
§§  330-331.  [To  cover  cases  like  those 
provided  for  by  Laws  of  N.  Y.  1877, 
ch.  65,  section  i  (repealed);  and  Laws 
of  N.  Y.  1S94,  ch.  262,  section  i.] 


§  26.  When  payable  on  demand.  [§  7] 

An  instrument  is  payable  on  demand : 

1 .  Where  it  is  expressed  to  be  payable  on  demand,  or 
at  sight  (^),  or  on  presentation  ;  or 

2.  In  which  no  time  for  payment  is  expressed.  {U) 
Where  an  instrument  is  issued,  accepted  or  indorsed  when 

overdue,  it  is,  as  regards  the  person  so  issuing,  accepting  or 
indorsing  it,  payable  on  demand,  (r) 

[Note.  —  See  Bills  of  Exchange  Act,  section  lo.] 


(a)     Cases,  pp.  234-236. 
(li)     Cases,  p.  236. 

((.-)     Cases,    pp.    236-237.      [Light   ■ 
Kingsbury,  50  Mo.  331;   Bassenhorst  v. 


Wilby,  45  Ohio  St.  333;  Smith  v.  Cord, 
g  Oregon,  278;  Daniel  on  Neg.  Inst., 
sections  611,  996.] 


§  27.  When  payable  to  order.  f§  8] 

The  instrument  is  payable  to  order  where  it  is  drawn  pay- 
able to  the  order  of  a  specified  person  or  to  him  or  his 
order,  {a)     It  may  be  drawn  payable  to  the  order  of : 

I .  A  payee  who  is  not  maker,  drawer  or  drawee ;  or 


12 


THE   NEGOTIABLE    INSTRUMENTS   LAW. 


2.  The  drawer  *  or  maker ;  {b)  or 
3    The  drawee ;  {c)  or 

4.  Two  or  more  payees  jointly;  {d)  or 

5.  One  or  some  of  several  payees;  (r)  or 

6.  The  holder  of  an  office  for  the  time  being.  (/) 
Where  the  instrument  is  payable  to  order  the  payee  must 

be  named   or   otherwise   indicated  therein  with   reasonable 
certainty,  {g) 


[Note.  —  See  Bills  of  Exchange  Act, 
{a)  [The  Bills  of  Exchange  Act  pro- 
vides that  "  a  bill  is  payable  to  order 
which  is  expressed  to  be  so  payable  or 
which  is  expressed  to  be  payable  to  a 
particular  person  and  does  not  contain 
words  prohibiting  transfer  or  indicating 
an  intention  that  it  should  not  be  trans- 
ferable." But  this  changes  the  law 
(Byles,  83;  Smith  v.  Kendall,  6  T.  R. 
123;  Maule  V.  Crawford,  14  Hun,  193; 
Daniel  on  Neg.  Inst.,  section  105),  and 
the  change  is  not  deemed  advanta- 
geous. Frederick  v.  Cotton,  2  Shower, 
8;  Smith  v.  McClure,  5  East,  476;  How- 
ard V.  Palmer,  64  Me.  86;  Daniel  on 
Neg.  Inst.,  section  106.] 
{b)     Cases,  p.  254. 


sections  5,  7,  S.] 

(<)     Cases,  pp.  254-255. 

{d)    Cases,  pp.  255-258. 

{e)  Cases,  pp.  258-261.  [The  Bills 
of  Exchange  Act  permits  the  instru- 
ment to  be  drawn  to  "  one  or  two 
payees  in  the  alternative."  But  this 
changes  the  law.  Blanckenhagen  v- 
Blundell,  2  Barn.  &  Aid.  418;  Walrad 
V.  Petrie,  4  Wend.  576;  Watson  v. 
Evans,  i  Hurl.  &  Colt.  663.] 

{/)  Cases,  pp.  261-263.  [Davis  v. 
Garr,  6  N.  Y.  124;  Daniel  on  Xeg.  Inst., 
section  loi.] 

{g)  Cases,  pp.  248-253.  [Byles  on 
Bills,  80;  Blackman  v.  Lehman,  63 
Ala.  547;  United  States  v.  White,  2 
Hill,  59-] 

[§9] 


28.  When  payable  to  bearer. 

The  instrument  is  payable  to  bearer: 

1.  When  it  is  expressed  to  be  so  payable;  {a)  or 

2.  When  it  is  payable  to  a  person  named  therein  or 
bearer ;  {a)  or 

3.  When  it  is  payable  to  the  order  of  a  fictitious  or 
non-existing  person,  and  such  fact  was  known  to  the 
person  making  it  so  payable ;  {b)  or 

4.  When  the  name  of  the  payee  does  not  purport  to 
be  the  name  of  any  person ;  {c)  or 

5.  When  the  only  or  last  indorsement  is  an  indorse- 
ment in  blank,  {d) 

[Note.  — See  Bills  of  Exchange  Act,  sections  7,  8.] 


{a)  Cases,  p.  263.  [Eddy  v.  Bond, 
19  Me.  461.] 

(/')  Cases,  pp.  263-268.  [Byles  on 
Bills,  82.1 


((•)     Cases,  p.  26S.     [Byles  on   Bills 
83.] 

((/)    Cases,    pp.    268-270.      See   §   64 
[34],  post. 


*  "  Drawee  "  is  used  by  mistake  in  N.  Y.  Act. — Ed. 


FORM   AND    INTERPRETATION.  I3 

§  29.  Terms  when  sufficient.  [§  lo] 

The  instrument  need  not  follow  the  language  of  this  act, 
but  any  terms  are  sufficient  which  clearly  indicate  an  inten- 
tion to  conform  to  the  requirements  hereof, 

§  30.  Date,  presumption  as  to.  [§  ii] 

Where  the  instrument  or  an  acceptance  or  any  indorse- 
ment thereon  is  dated,  such  date  is  deemed  prima  facie  to  be 
the  true  date  of  the  making,  drawing,  acceptance  or  indorse- 
ment as  the  case  may  be.  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  13.] 
{a)     Cases,  pp.  285-286. 

§  31.  Ante-dated  and  post-dated.  [§  12] 

The  instrument  is  not  invalid  for  the  reason  only  that  it  is 
ante-dated  or  post-dated,  provided  this  is  not  done  for  an 
illegal  or  fraudulent  purpose.  The  person  to  whom  an 
instrument  so  dated  is  delivered  acquires  the  title  thereto  as 
of  the  date  of  delivery,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  13.  See  Pasmore  v.  North,  13 
East,  517;   Brewster  v.  McCordle,  8  Wend.  47S;   Bayley  v.  Taber,  5  Mass.  286.] 

(a)     Cases,  pp.  2S6-287. 

§  32.  When  date  may  be  inserted.  [§  13] 

Where  an  instrument  expressed  to  be  payable  at  a  fixed 
period  after  date  is  issued  undated,  or  where  the  acceptance 
of  an  instrument  payable  at  a  fixed  period  after  sight  is 
undated,  any  holder  may  insert  therein  the  true  date  of  issue 
or  acceptance,  and  the  instrument  shall  be  payable  accord- 
ingly, (a)  The  insertion  of  a  wrong  date  does  not  avoid  the 
instrument  in  the  hands  of  a  subsequent  holder  in  due 
course ;  but  as  to  him,  the  date  so  inserted  is  to  be  regarded 
as  the  true  date,  {d) 

[Note.  —  See  Bills  of  Exchange  Act,  section  12.     See  note,  section  7.] 

(a)     See  §  33  [14].  I      (6)     Cases,  pp.  288-289.     [Mitchell  v 

I  Culver,  7  Cowen,  336.] 

§  33.  Blanks  ;  when  may  be  filled.  [§  14I 

Where  the  instrument  is  wanting  in  any  material  particu- 
lar, the  person  in  possession  thereof  has  a  prima  facie 
authority  to  complete  it  by  filling  up  the  blanks  therein,  (a) 


14  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

And  a  signature  on  a  blank  paper  delivered  by  the  person 
making  the  signature  in  order  that  the  paper  may  be  con- 
verted into  a  negotiable  instrument  operates  as  a  prima  facie 
authority  to  fill  it  up  as  such  for  any  amount.  (/;)  In  order, 
however,  that  any  such  instrument,  when  completed,  may  be 
enforced  against  any  person  who  became  a  party  thereto 
prior  to  its  completion,  it  must  be  filled  up  strictly  in  accord- 
ance with  the  authority  given  and  within  a  reasonable  time. 
But  if  any  such  instrument,  after  completion,  is  negotiated* 
to  a  holder  in  due  course,  it  is  valid  and  effectual  for  all 
purposes  in  his  hands,  and  he  may  enforce  it  as  if  it  had 
been  filled  up  strictly  in  accordance  with  the  authority  o-iven 
and  within  a  reasonable  time,  (r) 

[Note.  — See  Bills  of  Exchange  Act,  section  20.]     See  §  206  [12s], />osL 


(a)  Cases,  pp.  288-289.  [Bank  of 
Pittsburg  V.  Neal,  22  How.  96;  Mitchell 
V.  Culver,  7  Cowen,  336;  Kitchen  v. 
Place,  41  Barb.  465.] 

(/')  Cases,  pp.  289-291.  [Russell  v. 
Langstaffe,  2  Doug.  514;  Collis  v. 
Emett,  I  H.  Black,  313.] 


((■)  Cases,  pp.  291-29S.  [Schultz  v. 
Astle}-,  2  Bing.  N.  C.  544;  Van  Duzer 
V.  Howe,  21  N.  Y.  531;  Garrard  v. 
Hadden,  67  Pa.  St.  82;  Frank  v.  Lilien- 
feld,  33  Gratt.  384;  Redlich  v.  Dall.  54 
N.  Y.  234.] 


§  34.  Incomplete  instrument  not  delivered.  |  §  15] 

Where  an  incomplete  instrument  has  not  been  delivered  it 
will  not,  if  completed  and  negotiated,  without  authoritv,  be 
a  valid  contract  in  the  hands  of  any  holder,  as  against  any 
person  whose  signature  was  placed  thereon  before  delivery,  (a) 

[Note. — See  Davis  Machine  Co.  v.  Best,  105  N.  Y.  59,  67;  Sedgwick  v. 
McKim,  53  N.  Y.  307,  313;  Baxendale  v.  Bennett,  L.  R.  3  Q.  B.  525;  Daniel  on 
Neg.  Inst.,  sections  841,  842a.] 

(a)     Cases,  pp.  280-283. 

§  35.  Delivery;  when  effectual ;  when  presumed.  [§  i6J 

Every  contract  on  a  negotiable  instrument  is  incomplete 
and  revocable  until  delivery  of  the  instrument  for  the  pur- 
pose of  giving  effect  thereto.  As  between  immediate  par- 
ties, and  as  regards  a  remote  party  other  than  a  holder  in 
due  course,  the  delivery,  in  order  to  be  effectual,  must  be 
made  either  by  or  under  the  authority  of  the  party  making, 
drawing,  accepting  or  indorsing,  as  the  case  may  be;  and  in 

*"  Negotiable"  appears  by  mistake  in  the  New  York  Act."  —  Ed. 


FORM   AND   INTERPRETATION,  1$ 

such  case  the  delivery  may  be  shown  to  have  been  condi- 
tional, or  for  a  special  purpose  only,  and  not  for  the  purpose 
of  transferring  the  property  in  the  instrument,  (a)  But 
where  the  instrument  is  in  the  hands  of  a  holder  in  due 
course,  a  valid  delivery  thereof  by  all  parties  prior  to  him  so 
as  to  make  them  liable  to  him  is  conclusively  presumed,  (d) 
And  where  the  instrument  is  no  longer  in  the  possession  of 
a  party  whose  signature  appears  thereon,  a  valid  and  inten- 
tional delivery  by  him  is  presumed  until  the  contrary  is 
proved,  (c) 

[Note.  — See  Bills  of  Exchange  Act,  section  21.] 

(a)     Cases,  pp.  275-279.  (c)     Cases  sufra. 

{/>)     Cases,    pp.    279-2S3.     See    §    34 
[15],  ante. 

§  36.  Construction  where  instrument  is  ambiguous.         [§  17] 

Where  the  language  of  the  instrument  is  ambiguous,  or 
there  are  omissions  therein,  the  following  rules  of  construc- 
tion apply : 

1.  Where  the  sum  payable  is  expressed  in  words  and 
also  in  figures  and  there  is  a  discrepancy  between  the 
two,  the  sum  denoted  by  the  words  is  the  sum  payable ; 
but  if  the  words  are  ambiguous  or  uncertain,  references 
may  be  had  to  the  figures  to  fix  the  amount;  (a) 

2.  Where  the  instrument  provides  for  the'  payment  of 
interest,  without  specifying  the  date  from  which  interest 
is  to  run,  the  interest  runs  from  the  date  of  the  instru- 
ment, and  if  the  instrument  is  undated,  from  the  issue 
thereof;  (b) 

3.  Where  the  instrument  is  not  dated,  it  will  be  con- 
sidered to  be  dated  as  of  the  time  it  was  issued ;  (c) 

4.  Where  there  is  a  conflict  between  the  written  and 
printed  provisions  of  the  instrument,  the  written  pro- 
visions prevail;  {d) 

5.  Where  the  instrument  is  so  ambiguous  that  there  is 
doubt  whether  it  is  a  bill  or  note,  the  holder  may  treat 
it  as  either  at  his  election ;  (e) 

6.  Where  a  signature  is  so  placed  upon  the  instrument 
that  it  is  not  clear  in  what  capacity  the  person  making 
the  same  intended  to  sign,  he  is  to  be  deemed  an 
indorser ;  (/) 


l6  THE   NEGOTIABLE    INSTRUMENTS    LAW. 

7.  Where  an  instrument  containing  the  words 
"  I  promise  to  pay  "  is  signed  by  two  or  more  persons, 
they  are  deemed  to  be  jointly  and  severally  liable 
thereon.  (^) 

[Note.  —  See  Bills  of  Exchange  Act,  section  9.] 

(a)     Cases,  pp.  298-300. 

(d)     Cases,  p.  301. 

(c)     Cases,  p.  301.   [Byles  on  Bills,  77; 


Daniel  on  Neg.  Inst.,  sections  83,  84.] 

(ci)    Cases,  p.  301. 

((')     Cases,    p.   302.    [Heise    v.    Bum- 
pass,    40  Ark.    547;   Planters'   Bank  v. 


Evans,  36  Tex.  ex.  592;  Daniel  on  Neg. 
Inst.,  section  131,  and  cases  cited;  Edis 
V.  Bury,  6  Barn.  &  Cress.  433.] 

(/)  See  §  114  [64],/£7j-//  Herring  v. 
Woodhull,  29  111.  92.     Cases,  p.  302. 

(,if)  Cases,  pp.  302-304.  [See  Bills  of 
Exchange  Act,  section  85.] 


§  37.  Liability  of  person  signing  in  trade   or  assumed 

name.  [§  i8J 

No  person  is  liable  on  the  instrument  whose  signature 
does  not  appear  thereon,  except  as  herein  otherwise  expressly 
provided,  (a)  But  one  who  signs  in  a  trade  or  assumed 
name  will  be  liable  to  the  same  extent  as  if  he  had  signed  in 
his  own  name,  (d) 

[Note.  — See  Bills  of  Exchange  Act,  section  23.] 

(a)     Cases,  pp.  304-306.  See  §  72  [42],  I      (d)     Cases,  pp.  306-311. 

§  38.  Signature  by  agent ;  authority  ;   how  shown.  [§  19] 

The  signature  of  any  party  may  be  made  by  a  duly 
authorized  agent.  No  particular  form  of  appointment  is 
necessary  for  this  purpose ;  and  the  authority  of  the  agent 
may  be  established  as  in  other  cases  of  agency,  {a) 

(a)     See  Huffcut  on  Agency,  §§  9-59- 

§  39.  Liability  of  person  signing  as  agent,  etc.  [§  20] 

Where  the  instrument  contains  or  a  person  adds  to  his 
signature  words  indicating  that  he  signs  for  or  on  behalf  of  a 
principal,  or  in  a  representative  capacity,  he  is  not  liable  on 
the  instrument  if  he  was  duly  authorized ;  (^)  but  the  mere 
addition  of  words  describing  him  as  an  agent,  or  as  filling  a 
representative  character,  without  disclosing  his  principal, 
does  not  exempt  him  from  personal  liability,  (d) 

[Note. — See  Bills  of  Exchange  Act,  section  26;   Byles  on  Bills,  36;   Daniel 
on  Neg.  Inst.,  sections  298-302.] 

(a)     Cases,   pp.  311-316.     Mr.   Craw- I  edition   of   the    Neg.  Inst.  Law  (p.  26), 
ford,  the  draftsman  of  the  Act,  in  his  I  says:  "  In  the  original  draft  submitted 


FORM   AND   INTERPRETATION. 


17 


to  the  conference  of  commissioners  on 
uniformity  of  laws  this  section  read  as 
follows:  '  Where  a  person  adds  to  his 
signature  words  indicating  that  he 
signs  for  or  on  behalf  of  a  principal,  or 
in  a  representative  capacity,  he  is  not 
liable  on  the  instrument;  but  the  mere 
addition  of  words  describing  him  as  an 
agent,  or  as  filling  a  representative 
character,  does  not  exempt  him  from 
personal  liability.  In  determining 
whether  a  signature  is  that  of  the  prin- 
cipal or  of  the  agent  by  whose  hand  it 
is  written,  that  construction  is  to  be 
adopted  which  is  most  favorable  to  the 
validity  of  the  instrument.'  This  is  the 
English  rule,  and  was  the  rule  in  New 
York  prior  to  the  statute.  Under  that 
rule  a  person  signing  for  or  on  behalf 
of  a  principal  was  not  liable  on  the  itt- 
strumetit,  notwithstanding  he  had  no 
authority  to  bind  his  principal.     There 


was  an  implied  warranty  on  his  part 
that  he  possessed  such  authority,  and  if 
he  did  not,  he  became  liable  upon  such 
warranty  for  the  damages  resulting 
from  the  breach.  (Miller  v.  Reynolds, 
92  Hun,  400.)  But  no  action  could  be 
maintained  against  him  on  the  instru- 
ment, when  by  its  terms  it  did  not  pur- 
port to  bind  him.  And  his  liability 
upon  the  implied  warranty  did  not  ac- 
company the  transfer  of  the  instrument, 
unless  the  claim  founded  upon  the  war- 
ranty was  also  assigned  to  the  person 
to  whom  the  instrument  was  trans- 
ferred, (/i/.)  The  effect  of  the  section, 
as  it  now  stands,  is  to  permit  the 
holder  to  sue  the  agent  on  the  instru- 
ment, if  he  was  not  duly  authorized  to 
sign  the  same  on  behalf  of  the  prin- 
cipal." 

{b)     Cases,  pp.  317-320. 


§  40.  Signature  by  procuration  ;  effect  of.  [§  21] 

A  signature  by  ' '  procuration  ' '  operates  as  notice  that  the 
agent  has  but  a  limited  authority  to  sign,  and  the  principal 
is  bound  only  in  case  the  agent  in  so  signing  acted  within 
the  actual  limits  of  his  authority,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  25;   Byles  on  Bills,  33;   Daniels 
on  Neg.  Inst.,  section  280.] 
{a)     Cases,  pp.  320-321. 

§  41.  Effect  of  indorsement  by  infant  or  corporation.  [§  22] 
The  indorsement  or  assignment  of  the  instrument  by  a 
corporation  or  by  an  infant  passes  the  property  therein,  not- 
withstanding that  from  want  of  capacity  the  corporation  or 
infant  may  incur  no  liability  thereon,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  22.] 

{a)  Cases,  pp.  321-322.  This  section 
"  is  probably  declaratory,  but  the  law 
was  not  very  clear."  Chalmers,  Bills 
of    Exchange     Act    (5th    ed.),     p.     60. 


'  Capacity  to  incur  liability  must  be  dis- 
tinguished from  capacity  to  transfer. 
*  *  *  An  indorsement  usually  consists 
of  two  distinct  contracts,  one  executed, 
the  other  executory.  It  transfers  the 
property  in  the  bill,  and  it  also  involves 

^         NEGOT.    INSTRUMENTS  —  2 


a  contingent  liability  on  the  part  of  the 
indorser."  {lb.)  By  this  section,  when 
a  bill  is  payable  to  the  order  of  an  in- 
fant,  his  indorsement  transfers  the 
property  therein.  *  *  *  In  America  it  is 
not  uncommon  to  get  a  bill  made  pay- 
able to  the  order  of  an  infant  clerk.  His 
indorsement  then  operates  as  an  in- 
dorsement sans  recours,  though  without 
discrediting  the  bill."     {lb.,  p.  63.) 


1 8  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

§  42.  Forged  signature ;  effect  of.  [§  23] 

Where  a  signature  is  forged  or  made  without  authority  of 
the  person  whose  signature  it  purports  to  be,  it  is  wholly 
inoperative,  and  no  right  to  retain  the  instrument,  or  to  give 
a  discharge  therefor,  or  to  enforce  payment  thereof  against 
any  party  thereto,  can  be  acquired  through  or  under  such 
signature  (a),  unless  the  party,  against  whom  it  is  sought  to 
enforce  such  right,  is  precluded  from  setting  up  the  forgery 
or  want  of  authority,  (d) 

[Note.  —  See  Bills  of  Exchange  Act,  section  24.] 


(a)    Cases,  pp.  322-323. 

(i)  Cases,  p.  324.  "  The  word  'pre- 
cluded '  was  inserted  in  committee  in 
lieu  of  the   word  '  estopped,'  an  Eng- 


lish technical  term,  unknown  to  the 
Scotch  law."  Chalmers,  Bills  of  Ex- 
change Act  (5th  ed.),  p.  74. 


ARTICLE  III. 

CONSIDERATION  OF  NEGOTIABLE  INSTRUMENTS. 

^Section   50.  Presumption  of  consideration. 

51.  What  constitutes  consideration. 

52.  What  constitutes  holder  for  value. 

53.  When  lien  on  instrument  constitutes  holder  for  value. 

54.  Effect  of  want  of  consideration. 

55.  Liability  of  accommodation  indorser. 

§  50.  Presumption  of  consideration.  [§  24] 

Every  negotiable  instrument  is  deemed  prima  facie  to  have 
been  issued  for  a  valuable  consideration ;  and  every  person 
whose  signature  appears  thereon  to  have  become  a  party 
thereto  for  value,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  30.] 
(a)     Cases,  pp.  325-327. 

§  51.  Consideration,  what  constitutes.  [§  25] 

Value  (a)  is  any  consideration  sufficient  to  support  a  simple 
contract,  (b)  An  antecedent  or  pre-existing  debt  constitutes 
value ;  and  is  deemed  such  whether  the  instrument  is  pay- 
able on  demand  or  at  a  future  time,  {c) 

(a)  See  §  2  [General  Provisions],  |  (/')  "  A  cross  acceptance  (Rose  v. 
ante.  \  Sims,    i   B.  &  Ad.  p.  526),  the  forbear- 

*  §  [24]  to  [29]  in  the  other  States. 


CONSIDERATION   OF   NEGOTIABLE   INSTRUMENTS. 


19 


ance  of  the  debt  of  a  third  person  (Bal- 
four V.  Sea  Assur.  Co.,  3  C.  B.  N.  S. 
300;  Crears  v.  Hunter,  L.  R.  19  Q.  B. 
D.  341),  the  compromise  of  a  disputed 
liability  (Cook  v.  Wright,  30  L.  J.  Q.  B. 
321),  a  promise  to  give  up  a  bill  thought 
to  be  invalid  (Smith  v.  Smith,  13  C.  B. 
N.  S.  418),  a  debt  barred  by  the  statute 
of  limitations  (Latouche  v.  Latouche,  3 
H.  &  C,  p.  576),  or  the  obligation  on 
the  part  of  a  thief  to  restore  stolen  prop- 
erty (London,  etc.,  Bank  v.  River  Plate 
Bank,  L.  R.  21  Q.  B.  D.  535),  constitute 
value. 

"  A  mere  moral  obligation  (Eastwood 
V.  Kenyon,  11  A.  &  E.  438),  a  debt  rep- 
resented to  be  due  though  not  really 
due  (Southall  v.  Rigg,  11  C  B.  481), 
the   giving   up  a  void  note  (Coward  v. 


Hughes,  I  K.  &  J.  443),  or  a  voluntary 
gift  of  money  (Hill  v.  Wilson,  L.  R.  8 
Ch.,  p.  894),  do  not  constitute  value." 
Chalmers,  Bills  of  Exchange  Act  (5th 
ed.),  p.  So. 

((-)  Cases,  pp.  327-333.  [This  is  the 
rule  of  the  Supreme  Court  of  the 
United  States.  (Railroad  Company  v. 
National  Bank,  102  U.  S.  14.)  It  is 
also  the  English  rule.  See  Bills  of 
Exchange  Act,  section  27.  The  State 
decisions  are  very  conflicting.  (See 
numerous  cases  collected  in  Daniel  on 
Neg.  Inst.,  sections  827-S32.  The  New 
York  rule  has  produced  many  subtle 
refinements,  and  it  is  impossible  to 
reconcile  all  the  decisions  of  the  New 
York  courts.] 


52.  What  constitutes  holder  for  value.  [§  26] 

Where  value  has  at  any  time  been  given  for  the  instru- 
ment, the  holder  is  deemed  a  holder  for  value  in  respect  to 
all  parties  who  became  such  prior  to  that  time,  {a) 

[Note.  —  See  Bills  of  E.xchange  Act,  section  27,  subdivision  (2).] 

{a)     Cases,    pp.    334-337.      A    holder  1  in  due  course.     See  §  91  [^^2],  post. 
for  value  may  or  mar  not  be  a  holder  | 

§  53-  When  lien  on  instrument  constitutes  holder  for  value. 

[§  27] 
Where  the  holder  has  a  lien  on  the  instrument,  arising- 
either  from  contract  or  by  implication  of  law,  he  is  deemed  a 
holder  for  value  to  the  extent  of  his  lien,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  27.] 


(a)  Cases,  pp.  337-338.  Discount 
must  be  distinguished  from  pledge  or 
deposit  for  security.  A  discounter  or 
purchaser  of  the  bill  is  a  holder  for 
full  value.  A  pledgee  is  a  trustee  of 
the  pledgor.  If  the  pledgor  could  have 
sued    on    the    instrument    the    pledgee 


may  recover  the  whole  amount,  ac- 
counting to  the  pledgor  for  any  surplus 
above  the  amount  of  the  lien;  other- 
wise he  can  recover  only  the  amount  of 
the  lien.  Chalmers,  Bills  of  Exchange 
Act  (5th  ed.),  p.  86. 


§  54.  Effect  of  want  of  consideration.  [§  28] 

Absence  or  failure  of  consideration  is  matter  of  defense  as 

against  any  person  not  a  holder  in  due  course ;  {a)  and  partial 

failure  of  consideration  is  a  defense  pro  tanto  whether  the 


20 


THE   NEGOTIABLE    INSTRUMENTS    LAW. 


failure  is  an  ascertained  and  liquidated  amount   or   other- 
wise,  {b) 

{a)     See  §  91  [52],  post.  as    one    who    is    not    a    holder   in    due 

{b)     Cases,    pp.   338-339.      An   imme-    course.     See  Chalmers,  p.  95. 
diate  party  stands  in  the  same  relation 

§  55.  Liability  of  accommodation  party.  [§  29] 

An  accommodation  party  is  one  who  has  signed  the  instru- 
ment as  maker,  drawer,  acceptor  or  indorser,  without  receiv- 
ing value  therefor,  and  for  the  purpose  of  lending  his  name 
to  some  other  person,  {a)  Such  a  person  is  liable  on  the 
instrument  to  a  holder  for  value,  notwithstanding  such 
holder  at  the  time  of  taking  the  instrument  knew  him  to  be 
only  an  accommodation  party,  {b) 

[Note.  —  See  Bills  of  Exchange  Act,  section  2S.] 

{a)  If  the  principal  debtor  (maker  or 
acceptor)  be  an  accommodation  party, 
the  instrument  is  an  accommodation 
note   or   bill.     Chalmers,  p.  87. 

Corporations   may  not,    usually,   be- 


come accommodation  parties.  Nor  has 
one  partner  implied  power  to  lend  the 
credit  of  the  firm  as  accommodation 
party. 

{b)     Cases,  pp.  339-340. 


ARTICLE  IV. 

NEGOTIATION. 
*Section   60.  What  constitutes  negotiation. 

61.  Indorsement;  how  made. 

62.  Indorsement  must  be  of  entire  instrument. 

63.  Kinds  of  indorsement. 

64.  Special  indorsement;   indorsement  in  blank. 

65.  Blank  indorsement;  how  changed  to  special  indorsement. 

66.  When  indorsement  restrictive. 

67.  Effect  of  restrictive  indorsement;  rights  of  indorsement. 

68.  Qualified  indorsement. 

69.  Conditional  indorsement. 

70.  Indorsement  of  instrument  payable  to  bearer. 

71.  Indorsement  where  payable  to  two  or  more  persons. 

72.  Effect  of  instrument  drawn  or  indorsed  to  a  person  as  cashier. 

73.  Indorsement  where  name  is  mispelled,  et  cetera. 

74.  Indorsement  in  representative  capacity. 

75.  Time  of  indorsement;   presumption. 

76.  Place  of  indorsement;  presumption. 

77.  Continuation  of  negotiable  character. 

78.  Striking  out  indorsement. 

79.  Transfer  without  indorsement;  effect  of. 

80.  When  prior  party  may  negotiate  instrument. 


■§  [30]  to  [50]  in  the  other  States. 


NEGOTIATION.  21 

§  60.  What  constitutes  negotiation.  [§  30] 

An  instrument  is  negotiated  when  it  is  transferred  from 
one  person  to  another  in  such  manner  as  to  constitute  the 
transferee  the  holder  thereof,  {a)  If  payable  to  bearer  {b)  it 
is  negotiated  by  delivery  (<r) ;  if  payable  to  order  (i/)  it  is 
negotiated  by  the  indorsement  of  the  holder  completed  by 
delivery,  {e) 

[Note.  —  See  Bills  of  Exchange  Act,  sections  31,  subdivisions  (i),  (2)  and  (3).] 


{a)     Cases,  p.  341.     See  "holder"  de- 
fined, ante,  §  2  [General  Provisions] 
{b)     See  §  28  [9],  ante. 
(<r)     Cases,  pp.  342-343. 


{a)    See  §  27  [8],  ante. 

{e)  Cases,  pp.  343-34S  (including 
indorsement  in  form  of  assignment 
and  of  guaranty). 


§  61.   Indorsement ;  how  made.  [§  31] 

The  indorsement  must  be  written  on  the  instrument  itself 
or  upon  a  paper  attached  thereto,  {a)  The  signature  of  the 
indorser,  without  additional  words,  is  a  sufficient  indorse- 
ment, {b) 


{a)  Cases,  pp.  348-350.  [Crosby  v. 
Roub,  16  Wis.  616;  Folger  v.  Chase, 
18  Pick.  63;  French  v.  Turner,  15  Ind. 
59.  The  rule  as  commonly  stated  is, 
that  where  there  is  not  room  on  the 
bill,  the  indorsement  may  be  on  an 
allonge.  But  it  is  not  necessary  that 
there  should  be  a  physical  impossibil- 
ity of  writing  the  indorsement  on  the 
instrument  itself;  it  may  be  on  an 
allonge  whenever  the  necessity  or  con- 
venience of  the  parties  require  it.  (See 
cases  above  cited.)     Besides,  any  such 


statement  of  the  rule  would  give  rise 
to  a  question  of  fact  which  might  be 
determined  variously.]  See  Bills  of 
Exchange  Act,  section  32.  "  Some  of 
the  foreign  codes  contain  minute  pro- 
visions to  prevent  frauds,  e.  g.,  that 
the  first  indorsement  on  the  allonge 
must  begin  on  the  bill  and  end  on  the 
allonge;  otherwise  an  allonge  might 
be  taken  from  one  bill  and  stuck  on  to 
another."  Chalmers,  Bills  of  Ex- 
change Act,  (5th  ed.),  p.  107. 
{b)     See  §§  63-64  [33-34].  post. 


§  62.  Indorsement  must  be  of  entire  instrument.  [§  32] 

The  indorsement  must  be  an  indorsement  of  the  entire 
instrument.  An  indorsement,  which  purports  to  transfer  to 
the  indorsee  a  part  only  of  the  amount  payable,  or  which 
purports  to  transfer  the  instrument  to  two  or  more  indorsees 
severally,  does  not  operate  as  a  negotiation  of  the  instru- 
ment, {a)  But  where  the  instrument  has  been  paid  in  part, 
it  may  be  indorsed  as  to  the  residue,  {b) 

[Note.  —  See  Bills  of  Exchange  Act,  section  32,  subdivision  (2);  Lindsay  v. 
Price,  33  Tex.  280;  Hughes  v.  Kiddell,  2  Bay,  324;  Daniel  on  Neg.  Inst., 
section  668.] 


22 


THE   NEGOTIABLE   INSTRUMENTS    LAW. 


(a)     Cases,  pp.  350-35 r. 

(d)  "  C,  the  holder  of  a  bill  for  loo/., 
indorses  it,  '  Pay  D,  or  order,  30  /.' 
This  is  invalid,  unless  C  also  acknowl- 


edge the  receipt  of  70  /.  (Hawkins  v. 
Cardy,  i  Ld.  Raym.  360.)"  Chalmers. 
Bills  of  Exchange  Act  (5th  ed.),  p.  107. 


§  63.  Kinds  of  indorsement.  [§  33] 

An  indorsement  may  be  either  special  or  in  blank ;  and  it 
may  also  be  either  restrictive  or  qualified,  or  conditional. 

§  64.  Special  indorsement ;  indorsement  in  blank.  [§  34] 

A  special  indorsement  specifies  the  person  to  whom,  or  to 
whose  order  the  instrument  is  to  be  payable;  and  the 
indorsement  of  such  indorsee  is  necessary  to  the  further 
negotiation  of  the  instrument,  {a}  An  indorsement  in  blank 
specifies  no  indorsee,  and  an  instrument  so  indorsed  is  pay- 
able to  bearer,  and  may  be  negotiated  by  delivery.  (Jj) 

[Note.  —  See  Bills  of  Exchange  Act,  section  34.] 
See  §  27  [8],  <!!!fc 


(a)     Cases,  p.  351 
and  §  70  [4.6],  post. 

(d)  Cases,  pp.  352-354.  See  §  28  [9], 
ant^  "  Bill  payable  to  the  order  of 
John  Smith.  He  signs  on  the  back 
'  John  Smith.'  This  act  is  interpreted 
by  the  law  merchant  as  an  indorse- 
ment   in     blank    by    John    Smith,    and 


operates  as  if  he  had  written:  i.  I 
hereby  assign  this  bill  to  bearer. 
2.  I  hereby  undertake  that  if  this  bill 
be  dishonored,  I,  on  receiving  due 
notice  thereof,  will  indemnify  the 
bearer."  Chalmers,  Bills  of  Exchange 
Act  (5th   ed.),  p.  no.     See  §   116  [66], 


§  65.   Blank  indorsement ;   how  changed  to  special  indorse- 
ment. [§  351 

The  holder  may  convert  a  blank  indorsement  into  a  special 
indorsement  by  writing  over  the  signature  of  the  indorser  in 
blank  any  contract  consistent  with  the  character  of  the 
indorsement,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  34;  Daniel  on  Neg.  Inst.,  sec- 
tion 694,  and  cases  cited.] 

{a)  Cases,  pp.  352-354-  "  The 
holder  of  a  bill,  indorsed  by  C  in 
blank,  writes  over  C's  signature  the 
words,  '  Pay  to  the  order  of  D.'  The 
holder   who   does   this  is   not  liable  as 


an  indorser,  but  the  transaction  oper- 
ates as  a  special  indorsement  from  C 
to  D.  (Vincent  v.  Horlock,  i  Camp. 
442.)"  Chalmers,  Bills  of  Exchange 
Act  (5th  ed.),  p.  112. 


66.  When  indorsement  restrictive.  [§36] 

An  indorsement  is  restrictive,  which  either : 

I.   Prohibits    the    further   negotiation   of  the   instru- 
ment ;  {a)  or 


NEGOTIATION.  23 

2.  Constitutes  the  indorsee  the  agent  of  the  indorser ;  (^) 
or 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the 
use  of  some  other  person,  (c) 

But  the  mere  absence  of  words  implying  power  to  negoti- 
ate does  not  make  an  indorsement  restrictive,  {d) 

[Note.  —  Illustrations: 

(i)  Pay  Bank  of  A.  only.     For  deposit  in  Bank  of  A.  only. 

(2)  Pay  A.  Cashier,  or  order,  for  collection. 

(3)  Pay  A.  for  account  of  C. 

The  language  of  the  Bills  of  Exchange  Act,  (§  35),  is:  "  It  is  a  mere  authority 
to  deal  with  the  bill  as  thereby  directed,  and  not  a  transfer  of  the  ownership 
thereof."  But  this  cannot  apply  to  the  indorsement  mentioned  in  sub- 
division (3);  for  in  such  a  case  the  indorser  means  that  the  title  shall  pass. 
Thus,  if  the  indorsement  is  "  Pay  A  for  use  of  B  "  the  title  passes  to  A;  but 
the  indorsement  is  restrictive  to  the  extent  that  it  gives  notice  that  the  instru- 
ment cannot  be  negotiated  by  A  for  his  own  debt  or  for  his  own  benefit. 
Hook  V.  Pratt,  78  N.  Y.  371,  375.] 

(a)     Cases,  pp.  354-357-  I      (')     Cases,  pp.  361-364. 

(^)     Cases,  pp.  357-361.  I      {a)    Cases,   pp.  356-357. 

§  67.  Effect  of  restricting  indorsement;  rights  of  indorsee. 

[§37] 

A  restrictive  indorsement  confers  upon  the  indorsee  the 
right : 

1.  To  receive  payment  of  the  instrument; 

2.  To  bring  any  action  thereon  that  the  indorser  could 
bring ;  (a) 

3.  To  transfer  his  rights  as  such  indorsee,  where  the 
form  of  the  indorsement  authorizes  him  to  do  so. 

But  all  subsequent  indorsees  acquire  only  the  title  of  the 
first  indorsee  under  the  restrictive  indorsement. 

[Note.  —  See   Bills  of  Exchange  Act,  section   35.] 
Cases,  pp.  364-365.     See  ^  77  [47],/^^-^ 


(a)  [See  Wilson  v.  Tolson,  79  Ga. 
137;  Cummings  v.  Kohn,  12  Mo.  App, 
585;    Wintermute   v.  Torrent,  83  Mich. 


555.     Contra,    Roch  Co.   Nat.   Bank  v. 
Hollister,  21  Minn.  385.] 


§  68.  Qualified  indorsement.  [§  38] 

Qualified  indorsement  constitutes  the  indorser  a  mere, 
assignor  of  the  title  to  the  instrument,  (a)  It  may  be  made 
by  adding  to  the  indorser's  signature  the  words  "  without 
recourse  ' '  or  any  words  of  similar  import.     Such  an  indorse- 


24  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

ment  does  not  impair  the  negotiable  character  of  the  instru- 
ment, {b) 

[Note.  — See  Daniel  on  Neg.  Inst.,  section  700.]  See  Bills  of  Exchange  Act, 
section  i6. 

{a)     See  §  115  [bs],  post.  (b)     Cases,  pp.  365-367. 

§  69.  Conditional  indorsement  [§  39] 

Where  an  indorsement  is  conditional,  a  party  required  to 
pay  the  instrument  may  disregard  the  condition,  and  make 
payment  to  the  indorsee  or  his  transferee,  whether  the  con- 
dition has  been  fulfilled  or  not.  But  any  person  to  whom  an 
instrument  so  indorsed  is  negotiated,  will  hold  the  same,  or 
the  proceeds  thereof,  subject  to  the  rights  of  the  person 
indorsing  conditionally. 

[Note.  —  The  first  sentence  is  the  same  as  section  33  of  the  Bills  of  Exchange 
Act  with  a  slight  modification.  In  his  note  to  that  section  Judge  Chalmers 
says:  "  This  section  alters  the  law.  It  was  formerly  held  that  if  a  bill  was 
indorsed  conditionally,  the  acceptor  paid  it  at  his  peril  if  the  condition  was  not 
fulfilled.  This  was  hard  on  him.  If  he  dishonored  the  bill  he  might  be  liable 
to  damages,  and  yet  it  might  be  impossible  for  him  to  find  out  if  the  condition 
had  been  fulfilled."  See  Daniels  on  Neg.  Inst.,  sections  697,  698a.  There 
appear  to  be  no  American  cases  upon  the  subject;  and  the  only  English  case  is 
that  of  Robertson  v.  Kensington,  4  Taunt.  30.] 

Cases,  pp.  367-368. 

§  70.   Indorsement  of  instrument  payable  to  bearer.  [§  40] 

Where  an  instrument,  payable  to  bearer,  is  indorsed  spe- 
cially, it  may  nevertheless  be  further  negotiated  by  deliv- 
ery («);  but  the  person  indorsing  specially  is  liable  as 
indorser  to  only  such  holders  as  make  title  through  his 
indorsement,  {b) 

[Note.  —  See  Johnson  v.  Mitchell,  50  Tex.  212;  Smith  v.  Clarke,  Peake,  225; 
Daniel  on  Neg.  Inst.,  sections  663a,  696.] 

{a)     Cases,  pp.  368-371.  1      (/')     See  §§  116-117  [66-67], /('j;'. 

§  71.  Indorsement  where  payable  to  two  or  more  persons. 

[§4iJ 

Where  an  instrument  is  payable  to  the  order  of  two  or 

more  payees  or  indorsees  who  are  not  partners,   all  must 

indorse,  unless  the  one  indorsing  has  authority  to  indorse  for 

the  others,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  32,  subdivision  (3).     Daniel  on 
Neg.  Inst.,  section  701a.] 
(«)  Cases,  pp.  371-372. 


NEGOTIATION. 


25 


§  72.  Effect  of  instrument  drawn  or  indorsed  to  a  person  as 
cashier.  [§  42] 

Where  an  instrument  is  drawn  or  indorsed  to  a  person  as 
"  cashier  "  or  other  fiscal  officer  of  a  bank  or  corporation,  it 
is  deemed  prima  facie  to  be  payable  to  the  bank  or  corpora- 
tion of  which  he  is  such  officer ;  and  may  be  negotiated  by 
either  the  indorsement  of  the  bank  or  corporation,  or  the 
indorsement  of  the  officer,  (a) 

[Note.  —  It  is  common  practice  for  banks  to  indorse  in  this  manner  paper 
remitted  for  collection.  The  rule  above  stated  is  supported  by  the  following 
cases:  Bank  of  the  State  v.  Muskingum  Bank,  29  N.  Y.  619;  First  Nat.  Bank 
V.  Hall,  44  N.  Y.  395;  Bank  of  Genesee  v.  Patchin  Bank,  19  X.  Y.  312;  Folger  v. 
Chase,  18  Pick.  63;  Farmers',  etc.,  Bank  v.  Troy  City  Bank,  i  Dough.  (Mich.), 
457,  Watervliet  Bank  v.  White,  i  Denio,  608.] 

(a)     Cases,  p.    373.      See  §  37  [iS],  anie. 

§  ys.  Indorsement  where  name  is  mispelled,  et  cetera.     [§  43] 

Where  the  name  of  a  payee  or  indorsee  is  wrongly  desig- 
nated or  misspelled,  he  may  indorse  the  instrument  as 
therein  described,  adding,  if  he  think  fit,  his  proper  signa- 
ture, {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  32,  subdivision  (4).] 


(rt)  Cases,  pp.  373-374-  "A  ques- 
tion sometimes  arises  as  to  how  a  bill 
payable  (say)  to  '  Mrs.  John  Jones  ' 
should  be  indorsed.  The  proper  form 
appears    to   be    '  Ellen    Jones,    wife   of 


John  Jones.'  The  form  sometimes 
adopted,  viz.,  '  Mrs.  John  Jones,'  is 
clearly  irregular,  though  its  invalidity 
has  never  been  decided."  Chalmers, 
Bills  of  Exchange  Act  (5th  ed.),  p.  109. 


§  74.  Indorsement  in  representative  capacity.  [§  44] 

Where  any  person  is  under  obligation  to  indorse  in  a  rep- 
resentative capacity,  he  may  indorse  in  such  terms  as  to 
negative  personal  liability,  (a) 

[Note. — Same  as  Bills  of  Exchange  Act,  section  31,  subdivision  (5).]     ^  68 
[38],  ante;  also  §  39  [20],  ante, 
{a)  Cases,  p.  374. 

§  75.  Time  of  indorsement ;  presumption.  [§  45] 

Except  where  an  indorsement  bears  date  after  the  matur- 
ity of  the  instrument,  every  negotiation  is  deemed  prima 
facie  to  have  been  effected  before  the  instrument  was  over- 
due, {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  36,  subdivision  (4).  New 
Orleans,  etc.  v.  Montgomery,  95  U.  S.  i;  Collins  v.  Gilbert,  94  U.  S.  753.  See 
also  numerous  cases  cited  in  Daniel  on  Neg.  Inst.,  section  728.] 

(a)     Cases,    pp.    374-375-     See    §    91  [52]. /£>.?/. 


26  THE   NEGOTIABLE    INSTRUMENTS    LAW. 

§  76.  Place  of  indorsement ;  presumption.  [§  46] 

Except  where  the  contrary  appears  every  indorsement  is 
presumed  prima  facie  to  have  been  made  at  the  place  where 
the  instrument  is  dated,  {a) 

[Note.  —  See  Maxwell  v.  Vansant,  56  III.  58.]  "  The  contract  is  made  where 
delivery  is  effected,  not  where  the  signature  is  attached.  (Chapman  v.  Cottrell, 
34  L.J.  Ex.  186.)"  Chalmers,  Bills  of  Exchange  Act  (5th  ed.),  p.  239.  For 
summary  of  rules  governing  conflict  of  laws,  see  Bills  of  Exchange  Act.  §  72. 

{a)  Cases,  p.  375. 

§  77.  Continuation  of  negotiable  character.  [§47] 

An  instrument  negotiable  in  its  origin  continues  to  be 
negotiable  until  it  has  been  restrictively  indorsed  {a)  or  dis- 
charged by  payment  {b)  or  otherwise,  {c) 

[Note.  —  See  Bills  of  Exchange  Act,  section  36.] 

(a)     See  §§  66-67  [36-37],  ante.  I      (f)     Cases,  p.  375. 

{b)     See  §  200  [119], /('J-/.  I 

§  78.  Striking  out  indorsement.  [§  48] 

The  holder  may  at  any  time  strike  out  any  indorsement 
which  is  not  necessary  to  his  title,  {a)  The  indorser  whose 
indorsement  is  struck  out,  and  all  indorsers  subsequent  to 
him,  are  thereby  relieved  from  liability  on  the  instrument,  {b) 

(a)     Cases,  p.  375-  l'^)     See  §  ii6  [pt^^post. 

§  79.  Transfer  without  indorsement ;  effect  of.  [§  49] 

Where  the  holder  of  an  instrument  payable  to  his  order 
transfers  it  for  value  without  indorsing  it,  the  transfer  vests 
in  the  transferee  such  title  as  the  transferer  had  therein,  and 
the  transferee  acquires,  in  addition,  the  right  to  have  the 
indorsement  of  the  transferer,  {a)  But  for  the  purpose  of 
determining  whether  the  transferee  is  a  holder  in  due 
course,  the  negotiation  takes  effect  as  of  the  time  when  the 
indorsement  is  actually  made,  {b) 


(a)  Cases,  pp.  375-378.  [This  is  the 
same  as  Bills  of  Exchange  Act,  section 
31,  subdivision  (4).     It  establishes  the 


equitable    rule    as     the     rule    at    law. 
Daniel  on  Neg.  Inst.,  section  741.] 

{b)     Cases,     pp.     375-378.       [Goshen 
Nat.  Bank  v.  Bingham,  118  N.  Y.  349.] 


§  80.  When  prior  party  may  negotiate  instrument.  [§  50] 

Where  an  instrument  is  negotiated  back  to  a  prior  party  (a), 

such  party  may,   subject  to  the   provisions  of   this  act  (b), 


RIGHTS   OF    HOLDER. 


27 


reissue  and  further  negotiate  the  same,  (c)  But  he  is  not 
entitled  to  enforce  payment  thereof  against  any  intervening 
party  to  whom  he  was  personally  liable,  (d ) 

[Note.  —  See  Bills  of  Exchange  Act,  section  37.] 


(a)     See  §  202  [i2i],/(7j-A 
(d)     See  §g  200-206  [i  19-125],  pos(,  as 
to  discharges. 


(c)     Cases,  p.  378. 

((/)    This  is  a  rule  against  circuity  of 
action. 


ARTICLE  V. 

RIGHTS  OF  HOLDER. 

*Section  go.  Right  of  holder  to  sue;   payment. 

91.  What  constitutes  a  holder  in  due  course. 

92.  When  person  not  deemed  holder  in  due  course. 

93.  Notice  before  full  amount  paid. 

94.  When  title  defective. 

95.  What  constitutes  notice  of  defect. 

96.  Rights  of  holder  in  due  course. 

97.  When  subject  to  original  defenses. 

98.  Who  deemed  holder  in  due  course. 

§  90.  Right  of  holder  to  sue  ;  payment.  [§  51] 

The  holder  (a)  of  a  negotiable  instrument  may  sue  thereon 
in  his  own  name  (/;) ;  and  payment  to  him  in  due  course  dis- 
charges the  instrument,  {c) 

[Note.  —  See  Bills  of  Exchange  Act,  section  38,  subdivisions  (i)  and  (3).] 


(a)  See  §  2  [General  Provisions], 
ante.  "  The  Act  deals  only  with  trans- 
fer by  negotiation,  that  is,  transfer 
according  to  the  law  merchant.  It 
leaves  untouched  the  rules  of  general 
law  which  regulate  the  transmission  of 
bills  by  act  of  law,  and  their  transfer 


as  choses  in  action  or  chattels  accord- 
ing to  the  general  law,"  {e.  g.,  by  mar- 
riage, death,  bankruptcy,  sale  on  exe- 
cution, etc.).  Chalmers,  Bills  of 
Exchange  Act  (5th  ed.),  p.  125. 

(/')     Cases,  pp.  379-385 

{c)     See  §  148  [88],  200  [119],  post. 


§  91.  What  constitutes  a  holder  in  due  course.  [§  52] 

A  holder  in  due  course  is  a  holder  who  has   taken   the 
instrument  under  the  following  conditions : 

1.  That  it  is  complete  and  regular  upon  its  face ;  {a) 

2.  That  he  became  the  holder  of  it  before  it  was  over- 
due, and  without  notice  that  it  had  been  previously  dis- 
honored, if  such  was  the  fact;(^) 

3.  That  he  took  it  in  good  faith  and  for  value  ;  {c) 

*§  [51]  to  §  [59]  in  the  other  States. 


28  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

4.  That  at  the  time  it  was  negotiated  to  him  he  had  no 
notice  of  any  infirmity  in  the  instrument  or  defect  in  the 
title  of  the  person  negotiating  it.  {d) 

[Note.  —  See  Bills  of  Exchange  Act,  section  29,  subdivisions  {a)  and  {(>).'] 
"  The  act  has  substituted  the  term  'holder  in  due  course  '  for  the  cumbrous 
equivalent  bona  fide  holder  for  value  without  notice."  Chalmers,  Bills  of 
Exchange  Act  (5th  ed.),  p.  90 


(a)     Cases,  pp.  386-387.     See  g|  32-33 
[13-14],  ante. 

(i)     Cases,  pp.  387-397- 


(e)  Cases,  pp.  397-399-  See  §  51  [25], 
afite. 

(d)  Cases,  pp.  400-414.  See  §  95 
[s(>lJ>ost. 


§  92.   When  person  not  deemed  holder  in  due  course.       [§  53] 
Where  an  instrument  payable  on  demand  {a)  is  negotiated 
an  unreasonable  length  of  time  {&)  after  its  issue,  the  holder 
is  not  deemed  a  holder  in  due  course,  {c) 

[Note.  —  See  Bills  of  Exchange  Act,  section  36,  subdivision  (3).  Crim  v. 
Stockweather,  88  N.  Y.  339;  Herrick  v.  Woolverton,  41  N.  Y.  581.] 

(a)     See  §  26  [7],  anle.  (e)     Cases,  pp.  396-397- 

(i)     See    §   4    [General    Provisions], 

§  93.  Notice  before  full  amount  paid.  [§  54] 

Where  the  transferee  receives  notice  of  any  infirmity  in 
the  instrument  or  defect  in  the  title  of  the  person  negotiat- 
ing the  same  before  he  has  paid  the  full  amount  agreed  to  be 
paid  therefor,  he  will  be  deemed  a  holder  in  due  course  only 
to  the  extent  of  the  amount  theretofore  paid  by  him.  (a) 

(a)     Cases,  pp.  415-417. 

§  94.  When  title  defective.  [§  55J 

The  title  of  a  person  who  negotiates  an  instrument  is 
defective  within  the  meaning  of  this  act  when  he  obtained 
the  instrument,  or  any  signature  thereto,  by  fraud,  duress, 
or  force  and  fear,  or  other  unlawful  means,  or  for  an  illegal 
consideration,  or  when  he  negotiates  it  in  breach  of  faith,  or 
under  such  circumstances  as  amount  to  a  fraud,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  29,  subdivision  (2).]  "  This  list 
of  defects  in  title  may  not  be  exhaustive.  A  person  whose  title  is  defective 
must  be  distinguished  from  a  person  who  has  no  title  at  all,  and  who  can  give 
none;  as  for  instance,  a  person  making  title  through  a  forged  indorsement. 
The  words  '  force  and  fear  '  were  inserted  in  committee  as  the  equivalent  of  the 
English  technical  term  duress,  which  is  unknown  to  Scotch  law.  (See  Bell's 
Principles,  9th  ed.,  g  12.)  "     Chalmers,  Bills  of  Exchange  Act  (5th  ed.),  p.  92. 

(a)  Cases,  pp.  425-445. 


RIGHTS    OF    HOLDER.  29 

§  95.  What  constitutes  notice  of  defect.  f  §  56] 

To  constitute  notice  of  an  infirmity  in  the  instrument  or 
defect  in  the  title  of  the  person  negotiating  the  same,  the 
person  to  whom  it  is  negotiated  must  iiave  had  actual  knowl- 
edge of  the  infirmity  or  defect,  or  knowledge  of  such  facts 
that  his  action  in  taking  the  instrument  amounted  to  bad 
faith,  {a) 

[Note.  —  Murray  v.  Lardner,  2  Wall,  no;  Swift  v.  Smith,  I02  U.  S.  442; 
Belmont  v.  Hoge,  35  N.  Y.  65;  Welsh  v.  Sage,  47  N.  Y.  143;  Nat.  Bank  of 
Republic  v.  Young,  41  N.  J.  Eq.  531;  Fifth  Ward  Sav.  Bank  v.  First  Nat. 
Bank,  48  N.  J.  L.  513;  Credit  Company  v.  Howe  Machine  Co.,  54  Conn.  357; 
Morton  v.  N.  A.  &  Selma  R'y  Co.,  79  Ala.  590.] 


{a)  Cases,  pp.  400-414,  See  Bills  of 
Exchange  Act,  §  90.  "  The  test  of  bona 
fides  as  regards  bill  transactions  has 
varied  greatly.  Previous  to  1820  the 
law  was  much  as  it  now  is  under  the 
Act.  But  under  the  influence  of  Lord 
Tenterden  due  care  and  caution  was 
made  the  test  (Gill  v.  Cubitt,  5  D.  &  R. 
324),  and  this  principle  seems  to  be 
adopted  by  section  9  of  the  Indian  Act. 
In  1834  the  Court  of  King's  Bench  held 
that  nothing  short  of  gross  negligence 
could  defeat  the  title  of  a  holder  for 
value.     (Cookv.  Jadis,  5  B.  &  Ad.  909.) 


Two  years  later  Lord  Denman  states  it 
as  settled  law  that  bad  faith  alone  could 
prevent  a  holder  for  value  from  recov- 
ering. Gross  negligence  might  be  evi- 
dence of  bad  faith,  but  was  not  conclu- 
sive of  it.  (Goodman  v.  Harvey,  4  A. 
&  E.  at  p.  876,  Uther  v.  Rich,  10  A.  & 
E.  784.)  This  principle  has  never  since 
been  shaken  in  England,  and  it  seems 
now  firmly  established  in  the  United 
States.  (Murray  v.  Lardner,  2  Wallace, 
at  p.  121;  Chapman  v.  Rose,  56  N.  Y., 
at  p.  140.)"  Chalmers,  Bills  of  Ex- 
change Act  (5th  ed.),  p.  272. 


§  96.  Rights  of  holder  in  due  course.  [§  57] 

A  holder  in  due  course  holds  the  instrument  free  from  any 
defect  of  title  of  prior  parties  and  free  from  defenses  avail- 
able to  prior  parties  among  themselves,  and  may  enforce 
payment  of  the  instrument  for  the  full  amount  thereof 
against  all  parties  liable  thereon,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  38,  subdivision  (2).] 

{a)  Cases,    pp.    419-421.      [Cromwell  v.  County  of  Sac,  96  U.  S.  51,  60.] 

§  97.  When  subject  to  original  defenses.  [§  58] 

In  the  hands  of  any  holder  other  than  a  holder  in  due 
course,  a  negotiable  instrument  is  subject  to  the  same 
defenses  as  if  it  were  non-negotiable,  {a)  But  a  holder  {b) 
who  derives  his  title  through  a  holder  in  due  course,  and 
who  is  not  himself  a  party  to  any  fraud  or  illegality  affecting 
the  instrument,  has  all  the  rights  of  such  former  holder  in 
respect  of  all  parties  prior  to  the  latter,  {c) 


30  IHE   NEGOTIABLE    INSTRUMENTS    LAW. 

[Note.  —  (a)  It  is  not  deemed  expedient  to  make  provision  as  to  what  equities 
the  transferee  will  be  subject  to;  for  the  matter  may  be  affected  by  the  statutes 
of  the  various  States  relating  to  set-off  and  counterclaim.  On  the  question 
whether  only  such  equities  may  be  asserted  as  attach  to  the  bill,  or  whether 
equities  arising  out  of  collateral  matters  may  also  be  asserted,  the  decisions  are 
conflicting.  In  an  act  designed  to  be  uniform  in  the  various  States,  no  more  can 
be  done  than  fix  the  rights  of  holders  in  due  course.] 

(d)    "  Whether    for   value    or   not."  I      (c)     Cases,  pp.  417-419. 
Bills  of  Exchange  Act,  §  29,  subsec.  (3).  | 

§  98.  Who  deemed  holder  in  due  course.  [§  59] 

Every  holder  is  deemed  prima  facie  to  be  a  holder  in  due 
course;  but  when  it  is  shown  that  the  title  of  any  person 
who  has  negotiated  the  instrument  was  defective,  the  bur- 
den is  on  the  holder  to  prove  that  he  or  some  person  under 
whom  he  claims  acquired  the  title  as  a  holder  in  due 
course,  (a)  But  the  last  mentioned  rule  does  not  apply  in 
favor  of  a  party  who  became  bound  on  the  instrument  prior 
to  the  acquisition  of  such  defective  title. 

[Note.  —  This  is  similar  to  Bills  of  Exchange  Act,  section  30,  subdivision  (2); 
but  the  phraseology  has  been  changed  so  as  to  better  harmonize  with  the  language 
of  section  55,  (N.  Y.  §  94),  which  is  the  same  as  Bills  of  Exchange  Act,  section  29» 
subdivision  (2).  The  language  of  the  Bills  of  Exchange  Act  is  "  subsequent  to 
the  alleged  fraud  or  illegality."  But  this  is  not  quite  correct;  for  the  holder 
may  be  a  holder  in  due  course,  though  the  fraud  or  illegality  was  in  the  transfer 
to  him.  The  last  sentence  has  no  equivalent  in  the  Bills  of  Exchange  Act;  but 
it  is  necessary  to  qualify  the  general  statement.  If  A  issues  his  note  to  B,  and 
C  gets  possession  of  it  and  fraudulently  negotiates  it  to  D,  the  fraud  of  C  in 
nowise  affects  A,  and  is  no  defense  to  him  when  sued  on  the  instrument  by  D.] 

(a)  Cases,  pp.  422-425.  See  Tatam  I  struing  Bills  of  Exchange  Act,  §  30, 
V.   Haslar,   L.  R.  23  Q.  B.  D.  345.  con- 1  subsec.  (2). 

ARTICLE  VI. 

LIABILITIES  OF   PARTIES. 

*  Section  no.  Liability  of  maker. 

111.  Liability  of  drawer. 

112.  Liability  of  acceptor. 

113.  When  person  deemed  indorser. 

114.  Liability  of  irregular  indorser. 

115.  Warranty;  where  negotiation  by  delivery,  et  cetera. 

116.  Liability  of  general  indorsers. 

117.  Liability  of  indorser  where  paper  negotiable  by  delivery. 

118.  Order  in  which  indorsers  are  liable. 

119.  Liability  of  agent  or  broker. 

*  ^  [60]  to  §  [69]  in  the  other  States. 


LIABILITIES   OF   PARTIES.  3I 

§110.  Liability  of  maker.  [§  60] 

The  maker  of  a  negotiable  instrument  by  making  it 
engages  that  he  will  pay  it  according  to  its  tenor  (a) ;  and 
admits  the  existence  of  the  payee  and  his  then  capacity  to 
indorse,  (b) 

[Note.  —  See  Bills  of  Exchange  Act,  section  88.] 


(a)  Cases,  pp.  446.  "  The  maker 
of  a  promissory  note  is  the  principal 
debtor  on  the  instrument.  The  maker 
is  sometimes  called  the  drawer,  but 
the  primary  and  absolute  liability  of 
the  maker  of  a  note  must  be  distin- 
guished from  the  secondary  and  con- 
ditional   liability    of   the    drawer   of    a 


bill  of  exchange.  In  general  the  maker 
of  a  note  corresponds  with  the  acceptor 
of  a  bill  of  exchange,  and  the  same 
rules  apply  to  both."  Chalmers,  Bills 
of  Exchange  Act  (5th  ed.),  p.  270.  See 
§  130  [76],  post. 
{l>)     Cases,  p.  447. 


§  III.  Liability  of  drawer.  [§  6i] 

The  drawer  by  drawing  the  instrument  admits  the  exist- 
ence of  the  payee  and  his  then  capacity  to  indorse ;  and 
engages  that  on  due  presentment  the  instrument  will  be 
accepted  and  paid,  or  both,  according  to  its  tenor,  and  that 
if  it  be  dishonored,  and  the  necessary  proceedings  on  dis- 
honor be  duly  taken,  he  will  pay  the  amount  thereof  to  the 
holder,  or  to  any  subsequent  indorser  who  may  be  compelled 
to  pay  it.  {a)  But  the  drawer  may  insert  in  the  instrument 
an  express  stipulation  negativing  or  limiting  his  own  liability 
to  the  holder,  {b) 


{a)  Cases,  p.  452.  Bills  of  Exchange 
Act,  §  55,  subsec.  (i).  The  drawer's 
liability  is  similar  to  that  of  the  indor- 
ser's.     See  §  116  [bb],  post. 


(i>)     [See  Bills  of  Exchange  Act,  sec- 
tion 16.]     See  §  68  [38],  ante. 


§112.  Liability  of  acceptor.  [§  62J 

The  acceptor  by  accepting  (a)  the  instrument  engages  that 
he  will  pay  it  according  to  the  tenor  of  his  acceptance(^) ; 
and  admits : 

1.  The  existence  of  the  drawer,  the  genuineness  of  his 
signature,  and  his  capacity  and  authority  to  draw  the 
instrument ;  (c)  and 

2.  The  existence  of  the  payee  and  his  then  capacity  to 
indorse,  (d) 

[Note.  —  See  Bills  of  Exchange  Act,  section  54.     The  Bills  of  Exchange  Act 

contains  the  words,  "  but  not  the  genuineness  or  validity  of  his  indorsement." 

But  as  the  section  purports  to  specify  what  the  acceptance  admits,  all  other 


32  THE   NEGOTIABLE    INSTRUMENTS   LAW. 

matters  are  necessarily  excluded  by  implication.  To  specify  in  some  instances 
and  not  in  others  what  is  excluded  destroys  the  symmetry  of  the  Act,  and, 
besides,  might  give  rise  to  doubts  as  to  its  construction.] 

section  deals  only  with  estoppels  arising 
on  the  bill.  There  may,  of  course,  be 
other  estoppels  arising  on  evidence. 
(See  §  42  [23],  aiite.)  If  the  amount  of 
the  bill  be  altered,  or  if  any  other  mate- 
rial alteration  be  made  in  it,  the  ac- 
ceptor is  not  precluded  by  this  section 
from  setting  it  up.'"  Chalmers,  Bills 
of  Exchange  Act  (5th  ed.),  p.  185. 


{a)  As  to  acceptances,  see  §§  220-230 
[132-142],  post. 

(P)  The  acceptor  is  a  primary  party 
and  absolutely  liable.  See  §  3  [General 
Provisions],  ante.  No  demand  on  him 
is  necessary  to  fix  his  liability.  See 
§  130  [70],  post. 

(<-)     Cases,  pp.  448-451. 

{d)    Same  as  in  §  1 10  [60] ,  ante.  "  This 


§  113.  When  person  deemed  indorser.  [§63] 

A  person  placing  his  signature  upon  an  instrument  other- 
wise than  as  maker,  drawer  or  acceptor  is  deemed  to  be  an 
indorser,  unless  he  clearly  indicates  by  appropriate  words 
his  intention  to  be  bound  in  some  other  capacity.  (<^) 

[Note.  —  Section  56  of  the  Bills  of  Exchange  Act  provides:  "  Where  a  per- 
son signs  a  bill  otherwise  than  as  drawer  or  acceptor,  he  thereupon  incurs  the 
liabilities  of  an  indorser  to  a  holder  in  due  course."  But  this  language  is  too 
broad.  There  is  no  reason  why  one  should  not  bind  himself  as  guarantor  or 
surety  to  a  holder  in  due  course  if  he  clearly  indicates  such  an  intent.  The 
language  "  otherwise  than  as  maker,"  etc.,  would  not  meet  the  case  of  a  signa- 
ture so  placed  that  there  would  be  a  question  whether  the  person  signing 
meant  to  bind  himself  as  joint  maker  or  otherwise.  But  the  point  is  corrected 
in  section  17  (N.  Y.  §  36),  by  the  provision  "  that  where  a  signature  is  so  placed 
upon  the  instrument  that  it  is  not  clear  in  what  capacity  the  person  making  the 
same  intended  to  sign,  he  will  be  deemed  an  indorser."] 

(a)  See  Herring  v.  Woodhull,  29  111.  92.  Cases,  p.  348.  And  see  the  next 
section. 

§114.  Liability  of  irregular  indorser.  [§64] 

Where  a  person,  not  otherwise  a  party  to  an  instrument, 

places  thereon  his  signature  in  blank  before  delivery,  he  is 

liable  as  indorser  {a)  in  accordance  with  the  following  rules: 

1 .  If  the  instrument  is  payable  to  the  order  of  a  third 
person,  he  is  liable  to  the  payee  and  to  all  subsequent 
parties. 

2.  If  the  instrument  is  payable  to  the  order  of  the 
maker  or  drawer,  or  is  payable  to  bearer,  he  is  liable  to 
all  parties  subsequent  to  the  maker  or  drawer. 

3.  If  he  signs  for  the  accommodation  of  the  payee,  he 
is  liable  to  all  parties  subsequent  to  the  payee. 

[a)  Cases,  pp.  478-480. 


LIABILITIES   OF   PARTIES.  33 

[Note.  —  This  section  is  intended  to  cover  irregular  indorsements.  On  this 
subject  the  decisions  are  very  conflicting.  In  some  jurisdictions  a  person  plac- 
ing his  signature  on  the  back  of  a  note  before  the  payee  has  indorsed  is  deemed 
a  joint  maker;  in  other  jurisdictions  he  is  regarded  as  a  guarantor;  and  in  still 
others  as  an  indorser;  and  those  courts  which  hold  him  to  be  an  indorser  differ 
as  to  whether  he  is  a  first  or  second  indorser.  The  cases  are  too  numerous  to 
be  cited  here.  Many  of  them  will  be  found  in  Daniel  on  Negotiable  Instru- 
ments, sections  707-719.  The  rule  stated  above  is  embodied  in  part  in  section 
31 17  of  the  Civil  Code  of  California,  which  reads:  "  One  who  indorses  a  nego- 
tiable instrument  before  it  is  delivered  to  the  payee  is  liable  to  the  payee 
thereon,  as  an  indorser."  This  is  also  the  effect  (probably)  of  section  56  of  the 
Bills  of  Exchange  Act.  (See  Chalmers  on  Bills,  Notes  and  Cheques,  section  56.) 
The  California  rule  is  adopted  because  it  is  conducive  to  certainty,  and  because 
it  appears  to  accord  more  nearly  with  what  must  have  been  the  intention  of  the 
parties.  When  a  plain  man  puts  his  signature  on  the  back  of  a  negotiable 
instrument  he  ordinarily  understands  that  he  is  becoming  liable  as  an  indorser; 
and  if  he  puts  it  there  before  the  instrument  is  delivered,  he  usually  does  so  for 
the  purpose  of  giving  the  maker  or  drawer  credit  with  the  payee  or  other  person 
to  whom  it  is  negotiated.  In  many  of  the  cases  the  reasoning  is  highly  techni- 
cal, and  the  decisions  are  based  upon  considerations  which,  in  all  probability, 
never  entered  the  heads  of  the  parties  themselves.  The  California  Code  makes 
no  provision  for  a  case  where  the  instrument  is  drawn  to  the  order  of  the  maker 
or  drawer.  This  is  covered  by  subdivision  2,  above.  Subdivision  3  is  added 
to  provide  for  a  case  where,  the  pavee  being  unable  to  enforce  payment,  there 
might  be  a  question  whether  the  indorser  would  be  liable  to  a  person  claiming 
under  the  payee 

Illustrations. 

Note  made  by  A,  payable  to  order  of  B,  indorsed  by  C,  and  afterwards 
delivered  to  B.     C  is  liable  as  indorser  to  B. 

Note  made  by  A,  payable  to  order  of  himself,  indorsed  by  B,  and  afterwards 
delivered  to  C.     B  is  liable  as  indorser  to  C. 

Note  made  by  A,  to  order  of  B,  indorsed  by  C  before  B,  but  for  accommoda- 
tion of  B,  and  discounted  by  Bank  of  X.  C  is  liable  as  indorser  to  Bank  of  X 
and  not  to  B.] 

''Avals.  —  Such  an  indorsement  as  is  referred  to  by  this  section  would  in  con- 
tinental countries  be  termed  an  '  aval,'  which  is  said  by  Lord  Blackburn  to  be 
an  antiquated  term  signifying  '  underwriting.'  (5  App.  Cas.  at  p.  772.) 
According  to  Pothier  (as  cited  by  Lord  Blackburn,  supra),  an  '  aval  '  might  be 
either  on  the  bill  itself  or  on  a  separate  paper,  and  if  such  an  '  aval  '  was  given 
by  anyone,  his  obligation  to  all  subsequent  holders  of  the  bill  was  precisely  the 
same  as  that  of  the  person  to  facilitate  whose  transfer  the  aval  was  given,  and 
under  whose  signature  it  was  written.  English  and  Scotch  law,  as  Lord  Black- 
burn proceeds  to  point  out,  do  not  go  so  far  as  this.  If  a  person,  not  the 
holder,  indorse  a  bill,  he  is  not  a  surety  for  the  drawee  or  acceptor  to  the 
drawer;  '  such  an  indorsement  creates  no  obligation  to  those  who  previously 
were  parties  to  the  bill,  it  is  solely  for  the  benefit  of  those  who  take  subse- 
quently. It  is  not  a  collateral  engagement,  but  one  on  the  bill,  and  it  is  for 
that  reason  and  because  the  original  bill  has  incident  to  it  the  capacity  of  an 
indorsement  in  the  nature  of  an  '  aval,'  that  such  an  indorsement  requires  no 
new  stamp.     (Steele   v.    McKinlay,    5   App.   754;    see  also,   at  p.. 782,   per  Lord 

NEGOT.   INSTRUMENTS — 3 


34  THE   NEGOTIABLE  INSTRUMENTS  LAW. 

Watson,  and  his  comments  thereon,   in  Macdonald  v.  Whitfield,   8  App.  Cas. 
733,  at  p.  748.)  "     Chalmers,  Bills  of  Exchange  Act  (5th  ed.),  pp.  189-190. 

S  115.  Warranty  where  negotiation  by  delivery,  et  cetera. 

[§65l 
Every  person  negotiating  an  instrument  by  delivery  or  by 
a  qualified  indorsement,  warrants :  (a) 

1.  That  the  instrument  is  genuine  and  in  all  respects 
wha.t  it  purports  to  be ; 

2.  That  he  has  a  good  title  to  it ; 

3.  That  all  prior  parties  had  capacity  to  contract ; 

4.  That  he  has  no  knowledge  of  any  fact  which  would 
impair  the  validity  of  the  instrument  or  render  it  value- 
less. 

But  when  the  negotiation  is  by  delivery  only,  the  warranty 
extends  in  favor  of  no  holder  other  than  the  immediate 
transferee.  The  provisions  of  subdivision  three  of  this  sec- 
tion  do  not  apply  to  persons  negotiating  public  or  corporate 
securities,  other  than  bills  and  notes. 

(a)  Cases,  pp.  452-471. 

[Note.  —  Where  there  is  a  latent  defect,  as  for  example,  usury,  it  is  not  cov- 
ered by  the  implied  warranty  of  a  person  negotiating  the  instrument  without 
indorsement.  In  such  cases  scienter  is  necessary  in  order  to  render  the  trans- 
ferer liable.  (Litthauer  v.  Goldman,  72  N.  Y.  506.)  Nor  would  he  be  liable  if 
the  maker  of  the  note  had  become  insolvent  unless  he  knew  such  fact.  (Bicknall 
V.  Waterman,  5  R.  I.  43;  Fenn  v.  Harrison,  3  T.  R.  757;  Fydell  v.  Clark,  i  Esp. 
447.)  The  application  of  the  rule  of  commercial  paper  to  persons  selling  corpo- 
rate bonds,  etc.,  would  work  great  hardships  and  much  public  inconvenience. 
(See  Otis  v.  CuUum,  92  U.  S.  448-)] 

See  Bills  of  Exchange  Act,  section  58,  subsection  (3).  "  There  is  some  confu- 
sion in  the  cases  owing  to  the  distinction  between  the  warranty  of  genuineness 
and  the  liability  on  the  consideration  having  been  lost  sight  of.  The  warranty 
of  genuineness  is  an  incident  of  the  contract  of  sale,  and  it  is  immaterial 
whether  the  thing  sold  be  a  bill  or  any  other  personal  chattel.  The  transferer 
is  for  this  purpose  an  ordinary  vendor."  Chalmers,  Bills  of  Exchange  Act 
(5th  ed.),  p.  196. 

§  116.  Liability  of  general  indorser.  f§  66] 

Every  indorser  who  indorses  without  qualification,  war- 
rants to  all  subsequent  holders  in  due  course: 

1,  The  matter  and  things  mentioned  in  subdivisions 
one,  two  and  three  of  the  next  preceding  section ;  and, 

2.  That  the  instrument  is  at  the  time  of  his  indorse- 
ment valid  and  subsisting,  (a) 


LIABILITIES   OF   PARTIES.  35 

And,  in  addition,  he  engages  that  on  due  presentment,  it 
shall  be  accepted  or  paid,  or  both,  as  the  case  may  be, 
according  to  its  tenor,  and  that  if  it  be  dishonored,  and  the 
necessary  proceedings  on  dishonor  be  duly  taken,  he  will 
pay  the  amount  thereof  to  the  holder,  or  to  any  subsequent 
indorser  who  may  be  compelled  to  pay  it.  (/?) 

[Note.  —  See  Bills  of  Exchange  Act,  section  55,  subdivision  (2).  The  lan- 
guage of  the  Bills  of  Exchange  Act  fixing  the  liabilities  of  the  various  parties  is 
uniformly,  "  is  precluded  from  denying,  etc."  But  this  is  staling  the  effect  of 
the  principle  and  not  the  principle  itself.  Upon  such  a  statement  the  question 
arises:  Why  is  he  precluded  ?  The  reason  is  that  he  has  given  implied  war-'an- 
ties  and  admissions.  The  more  scientific  method  is  to  state  what  these  warran- 
ties and  admissions  are,  and  the  other  will  follow  by  implication.]  * 

(a)  Cases,  p.  472.  (/')  Cases,  pp.  474-478. 

§  117.  Liability  of  indorser  where  paper  negotiable  by  de- 
livery. [§  67] 
Where  a  person  places  his  indorsement  on  an  instrument 
negotiable  by  delivery  he   incurs   all   the   liabilities  of   an 
indorser.  (a) 

[Note.  —  See  Daniel  on  Neg.  Inst.,  section  663a,  and  cases  there  cited.] 
(a)  Cases,  p.  475. 

§  118.  Order  in  which  indorsers  are  liable.  [§  68] 

As  respects  one  another,  indorsers  are  liable  prima  facie 
in  the  order  in  which  they  indorse;  but  evidence  is  admis- 
sible to  show  that  as  between  or  among  themselves  they 
have  agreed  otherwise,  {a)  Joint  payees  or  joint  indorsees 
who  indorse  are  deemed  to  indorse  jointly  and  severally,  (d) 

[Note.  —  Evidence  to  show  an  agreement  for  a  joint  liability:  See  Easterly  v. 
Barber,  66  N.  Y.  433;  Phillips  v.  Preston,  5  How.  (U.  S.J  278;  Edelen  v. 
White,  6  Bush,  408.  Contra,  Johnson  v.  Ramsay,  43  N.  J.  L.  279;  Daniel  on 
Neg.  Inst.,  section  703.  Evidence  to  show  contract  that  one  was  to  be  prior 
indorser:  See  Slack  v.  Kirk,  77  Pa.  St.  380;  Reinhart  v.  Schall,  69  Md.  352; 
Slagel  v.  Rust,  4  Gratt.  274;  Daniel  on  Neg.  Inst.,  section  704.  As  to  joint 
payees  indorsing:  See  Lane  v.  Stacy,  8  Allen,  41;  Daniel  on  Neg.  Inst., 
section  704.] 

{a)     Cases,  pp.  480-486.  {H)     Cases,  pp.  485-486. 

*  The  following  provision  in  the  original  draft  was  omitted  in  the  final  revis- 
ion:  [But  the  provisions  of  this  section  do  not  apply  to  an  indorser  to  whom 
the  instrument  has  been  indorsed  restrictively  as  agent  only.  National  Park 
Bank  v.  Seaboard  National  Bank,  114  N.  Y.  28;  United  States  v.  American 
Exchange  Nat.  Bank,  70  Fed.  Rep.  232.] 


2,6  THE   NEGOTIABLE    INSTRUMENTS   LAW. 

§  119.  Liability  of  an  agent  or  broker.  [§  69J 

Where  a  broker  or  other  agent  negotiates  an  instrument 
without  indorsement,  he  incurs  all  the  liabilities  prescribed 
by  section  sixty-five  *  of  this  act,  unless  he  discloses  the 
name  of  his  principal,  and  the  fact  that  he  is  acting  only  as 
agent,  (a) 

[Note.  — See  Meridan  Nat.  Bank  v.  Gallaudet,  120  N.  Y.  298;  Cabot  Bank  v. 
Morton,  4  Gray,  156;  Worthington  v.  Cowles,  112  Mass.  30.] 

{a)     Cases,  pp.  473-474- 

ARTICLE   VIL 

PRESENTMENT  FOR  PAYMENT. 

f  Section  130.  Effect  of  want  of  demand  on  principal  debtor. 

131.  Presentment  where  instrument  is  not  payable  on  demand. 

132.  What  constitutes  a  sufficient  presentment. 

133.  Place  of  presentment. 

134.  Instrument  must  be  exhibited. 

135.  Presentment  where  instrument  payable  at  bank. 

136.  Presentment  where  principal  debtor  is  dead. 

137.  Presentment  to  persons  liable  as  partners. 

138.  Presentment  to  joint  debtors. 

139.  When  presentment  not  required  to  charge  the  drawer. 

140.  When  presentment  not  required  to  charge  the  indorser. 

141.  When  delay  in  making  presentment  is  excused. 

142.  When  presentment  may  be  dispensed  with. 

143.  When  instrument  dishonored  by  non-payment. 

144.  Liability     of    person    secondarily  liable,    when    instrument    dis- 

honored. 

145.  Time  of  maturity. 

146.  Time;  how  computed. 

147.  Rule  where  instrument  payable  at  bank. 

148.  What  constitutes  payment  in  due  course. 

§  130.  Effect  of  want  of  demand  on  principal  debtor.         [§  70] 

Presentment  for  payment  is  not  necessary  in  order  to 
charge  the  person  primarily  [liable]  I  on  the  instrument  (a) ; 
but  if  the  instrument  is,  by  its  terms,  payable  at  a  special 
place,  and  he  is  able  and  willing  to  pay  it  there  at  maturity, 
such  ability  and  willingness  are  equivalent  to  a  tender  of 
payment  upon  his  part.     But  except  as  herein  otherwise  pro- 

*  Error.  Should  read  §  115  in  New  York  Act.  It  is  §  65  of  the  Act  in  the 
other  States.  —  Ed. 

t  §  [70]  to  §  [88]  in  the  other  States. 

t  Omitted  by  error  in  New  York  Act.  —  Ed. 


PRESENTMENT  FOR  PAYMENT.  37 

vided,   presentment  for  payment   is   necessary   in  order  to 
charge  the  drawer  and  indorsers.  [b) 

[Note.  —  See  Bills  of  Exchange  Act,  section  52;  Hills  v.  Place,  48  N.  Y.  520, 
523:  Parker  v.  Stroud,  98  N.  Y.  379,  384;  Cox  v.  National  Bank,  100  U.  S.  713; 
Wallace  v.  McConnell,  13  Peters,  136;  Lozier  v.  Horan,  55  Iowa,  77;  Insurance 
Company  v.  Wilson,  29  W.  Va.  543.] 

{a)     Cases,  pp.  498-501.  I      {b)     Cases,    p.    501.     See  §   iii    [61], 

I  §  116  [66],  ante. 

§  131.  Presentment  where  instrument  is  not  payable  on  de- 
mand [and  where  payable  on  demand].  [§  71] 

Where  the  instrument  is  not  payable  on  demand,  present- 
ment must  be  made  on  the  day  it  falls  due.  {a)  Where  it  is 
payable  on  demand,  presentment  must  be  made  within  a 
reasonable  time  {b)  after  its  issue  (r),  except  that  in  the  case 
of  a  bill  of  exchange,  presentment  for  payment  will  be  suffi- 
cient if  made  within  a  reasonable  time  after  the  last  negotia- 
tion thereof,  {d) 

[Note.  —  See  Bills  of  Exchange  Act,  section  45,  subdivision  (2).  All  the 
authorities  agree  that  checks  and  bills  of  exchange  payable  on  demand  must  be 
presented  promptly;  but  as  to  promissory  notes  drawn  so  payable  there  is  much 
conflict.  In  Merritt  v.  Todd  (23  N.  Y.  28)  the  rule  was  laid  down  by  the  Court 
of  Appeals  of  New  York  that  "  a  promissory  note  payable  on  demand,  with 
interest,  is  a  continuing  security;  that  an  indorser  remains  liable  until  an  actual 
demand,  and  that  the  holder  is  not  chargeable  with  neglect  for  omitting  to 
make  such  demand  within  any  particular  time."  The  doctrine  of  this  case  has 
been  much  criticized.  In  some  States  the  time  within  which  promissory  notes, 
payable  on  demand,  must  be  presented,  is  fixed  by  statute.  California  Civil 
Code,  section  3248;  Connecticut  Gen'l  Statutes,  p.  405,  section  1859;  Minnesota 
Statutes  (1891),  section  2104.] 

(<r)     Cases,  pp.  504-509. 
(d)    Cases,    pp.    504-509.     See    §    241 
[144],  322  \i%t],post. 


{a)     Cases,  p.  504. 

{b)     See    §    4    [General     Provisions], 
ante. 


132.  What  constitutes  a  sufficient  presentment.  [§  72] 

Presentment  for  payment,  to  be  sufficient,  must  be  made : 

1.  By  the  holder,  or  by  some  person  authorized  to 
receive  payment  on  his  behalf ;  («) 

2.  At  a  reasonable  hour  on  a  business  day ;  {b) 

3.  At  a  proper  place  as  herein  defined;  (c) 

4.  To  the  person  primarily  liable  on  the  instrument, 
or  if  he  is  absent  or  inaccessible,  to  any  person  found  at 
the  place  where  the  presentment  is  made,  {d ) 


38 


THE   NEGOTIABLE   INSTRUMENTS   LAW. 


(a)  Cases,  pp.  501-503.  [See  Bills 
of  Exchange  Act,  section  45,  subdivi- 
sion (2).     Daniel  on  Neg.  Inst.,  sections 

571-587-] 

{/>)  Cases,  pp.  509-510.  [Salt  Springs 
Nat.  Bank  v.  Burton,  5S  N.  Y.430,  432; 
Farnsworth  v.  Allen,  4  Gray,  453; 
Barclay  v.  Bailey,  2  Camp.  527;  Wil- 
kins  V.  Jadis,  2  B.  &  Aid.  188.] 

(c)     See  §  133  [73]. 

((/)    Cases,  pp.   517-519.     See  §§  136- 


138  [76-78],  post.  [The  language  of 
the  Bills  of  Exchange  Act  is  "or  to 
some  person  authorized  to  pay  or  re- 
fuse payment  on  his  behalf  if  with  the 
exercise  of  reasonable  diligence  such 
person  cannot  be  found."  But  this 
rule  appears  to  be  more  stringent  than 
that  of  the  law  merchant.  See  Crom- 
well V.  Hynson,  2  Camp.  596;  Daniel 
on  Neg.  Inst.,  section  590.] 


§  133-  Place  of  presentment.  [§  73] 

Presentment  for  payment  is  made  at  the  proper  place : 

1.  Where  a  place  of  payment  is  specified,  in  the  instru- 
ment and  it  is  there  presented ;  (a) 

2.  Where  no  place  of  payment  is  specified,  but  the 
address  of  the  person  to  make  payment  is  given  in  the 
instrument  and  it  is  there  presented ;  (d) 

3.  Where  no  place  of  payment  is  specified  and  no 
address  is  given  and  the  instrument  is  presented  at  the 
usual  place  of  business  or  residence  of  the  person  to 
make  payment ;  (c) 

4.  In  any  [other]  *  case  if  presented  to  the  person  to 
make  payment  wherever  he  can  be  found,  or  if  presented 
at  his  last  known  place  of  business  or  residence,  (d) 

[Note.  — See  Bills  of  Exchange  Act,  section  45,  subdivision  (4).] 

(^)     Cases,  pp.  512-513. 


(a)  Cases,  pp.  512-513.  "  The  place 
of  payment  may  be  specified  either  by 
the  drawer,  or  by  the  acceptor  [or 
maker]."  Chalmers,  p.  145.  See §228 
[140],  post. 


(i)  Cases,  pp.  514-517.  [Gates  v. 
Beecher,  60  N.  Y.  518,  522;  Daniel  on 
Neg.  Inst.,  sections  635,  636.] 

((/)    Cases,  pp.  514-517. 


§  134.  Instrument  must  be  exhibited.  f^  74] 

The  instrument  must  be  exhibited  to  the  person  from 
whom  payment  is  demanded,  and  when  it  is  paid  must  be 
delivered  up  to  the  party  paying  it.  (a) 

[Note.  — See  Musson  v.  Lake,  4  How.  262;  Freeman  v.  Boynton,  7  Mass. 
483;  Draper  v.  Clemens,  7  Mo.  52;  Daniel  on  Neg.  Inst.,  section  654.] 


(a)  Cases,  pp.  520-521.  "  In  Eng- 
land, it  is  conceived  that  possession  is 
prima  facie  evidence  of  identity,  and 
that  if    the  payer  doubts  the  identity  of 


the  person  presenting,  he  must  pay  or 
refuse  payment  at  his  own  risk." 
Chalmers,  Bills  of  Exchange  Act  (5th 
ed.),  p.  203. 


Omitted  by  error  in  New  York  Act.  —  Ed. 


PRESENTMENT   FOR   PAYMENT.  39 

§  135-  Presentment  where  instrument  payable  at  bank.  [§  75] 

Where  the  instrument  is  payable  at  a  bank,  presentment 
for  payment  must  be  made  during  banking  hours,  unless  the 
person  to  make  payment  has  no  funds  there  to  meet  it  at  any 
time  during  the  day,  in  which  case  presentment  at  any  hour 
before  the  bank  is  closed  on  that  day  is  sufficient,  (a) 

[Note. —See  Salt  Springs  Nat.  Bank  v.  Burton,  58  N.  Y.  430,  and  cases 
there  cited;  Reed  v.  Wilson,  41  N.  J.  Law,  29.] 

(fli     Cases,  pp.  510-512. 

§  130.  Presentment  where  principal  debtor  is  dead.  [§  76] 

Where  the  person  primarily  liable  on  the  instrument  is 
dead,  and  no  place  of  payment  is  specified,  presentment  for 
payment  must  be  made  to  his  personal  representative,  if 
such  there  be,  and  if  with  the  exercise  of  reasonable  dili- 
gence, he  can  be  found,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  45,  subdivision  (7);  Daniel  on 
Neg.  Inst.,  section  501.]  This  is  declaratory.  (Williams  on  Executors,  7th  ed., 
p.  2003.)  See  §  242  (2)  [145],  and  245  (i)  [148],  fost,  for  rule  governing  present- 
ment for  acceptance. 

(a)     Cases,  pp.  518-519. 

§  137.  Presentment  to  persons  liable  as  partners.  [§  77l 

Where  the  persons  primarily  liable  (a)  on  the  instrument 
are  liable  as  partners,  and  no  place  of  payment  is  specified, 
presentment  for  payment  may  be  made  to  any  one  of  them, 
even  though  there  has  been  a  dissolution  of  the  firm,  (d) 

[Note. —See  Hubbard  v.  Matthews,  54  N.  Y.  43,  50;  Fourth  Nat.  Bank  v. 
Heuschuk,  52  Mo.  207;  Crowley  v.  Barry,  4  Gill.  194;  Cayuga  Co.  Bank  v. 
Hunt,  2  Hill,  635;  Daniel  on  Neg.  Inst.,  sections  592-593-] 

(a)     See    g    2    [General    Provisions],  I      {i)     Cases,  p.  519. 

§  138.  Presentment  to  joint  debtors.  f  §  78] 

Where  there  are  several  persons  not  partners,  primarily 
liable  on  the  instrument,  and  no  place  of  payment  is  speci- 
fied, presentment  must  be  made  to  them  all.  {a) 

[Note. —  See  Bills  of  Exchange  Act,  section  45,  subdivision  (6).  Gates  v. 
Beecher,  60  N.  Y.  518,  523;  Union  Bank  v.  Willis,  8  Mete.  504;  Arnold  v.  Dres- 
ser, 8  Allen,  435;  Willis  v.  Green,  5  Hill,  232.  In  some  cases  this  might  be 
impracticable,  but  such  cases  are  covered  by  section  82.  (N.  Y.,  §  142.)  ]  "  This 
is  probably  declaratory  (Union  Bank  v.  Willis,  49  Mass.  504),  but  the  point  was 


40  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

not  clear.     Of  course,  if  one  pays,  or  in  refusing  payment,  acts  as  the  agent  of 
the  others,  that  is  enough."     Chalmers,  Bills  of  Exchange  Act  (5th  ed.),  p.  146. 

(a)     Cases,  p.  519. 

§  139.  When  presentment  not  required  to  charge  the  drawer. 

[§  79J 
Presentment  for  payment  is  not  required  in  order  to  charge 
the  drawer  where  he  has  no  right  to  expect  or  require  that 
the  drawee  or  acceptor  will  pay  the  instrument,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  46,  subdivision  (2)  (c).  Life 
Insurance  Company  v.  Pendleton,  112  U.  S.  696;  Daniel  on  Neg.  Inst.,  sections 
1074-1076.]     See  §§  185-186  [114-iis],  J>ost. 

(a)     Cases,  pp.  523.  558-561. 

§  140.  When  presentment  not  required  to  charge  the  indor- 
ser.  [§  80] 

Presentment  for  payment  is  not  required  in  order  to 
charge  an  indorser  where  the  instrument  was  made  or 
accepted  for  his  accommodation,  and  he  has  no  reason  to 
expect  that  the  instrument  will  be  paid  if  presented,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  46,  subdivision  (2)  (d).]  See 
§  186  [lis],  post. 

(a)     Cases,  pp.  561-563. 

§  141.  When  delay  in  making  presentment  is  excused.    [§  8i] 

Delay  in  making  presentment  for  payment  is  excused 
when  the  delay  is  caused  by  circumstances  beyond  the  con- 
trol of  the  holder  and  not  imputable  to  his  default,  miscon- 
duct or  negligence.  When  the  cause  of  delay  ceases  to 
operate,  presentment  must  be  made  with  reasonable  dili- 
gence, (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  46,  subdivision  (i)  ]  "  The  cases 
do  not  clearly  distinguish  between  excuses  for  non-presentment  and  excuses  for 
delay  in  presentment,  but  when  the  question  is  one  of  reasonable  diligence  the 
distinction  is  an  important  one.  (cf.  Allen  v.  Edmundson,  2  Excn.,  at  p.  724, 
notice  of  dishonor.)  If  presentment  is  delayed  at  the  request  of  the  drawer  or 
indorser  sought  to  be  charged,  the  delay  is  presumably  excused.  (Lord  Ward 
V.  Oxford  R'y  Co.,  2  DeG.  M.  &  G.  750.)"  Chalmers,  Bills  of  Exchange  Act, 
(5th  ed.),  p.  149.  "  Bill  drawn  in  England,  payable  in  Leghorn.  At  the  time 
the  bill  matures  Leghorn  is  besieged.  The  holder  is  not  in  Leghorn.  This 
excuses  delay.     (Patience  v.  Townley,  2  Smith,  223.)  "     73.,  p.  148. 

(a)     Cases,  pp.  521-523. 


PRESENTMENT  FOR  PAYMENT. 


41 


142.  When  presentment  may  be  dispensed  with.  [§  82] 

Presentment  for  payment  is  dispensed  with : 

1.  Where  after  the  exercise  of  reasonable  diligence 
presentment  as  required  by  this  act  cannot  be  made ;  (a) 

2.  Where  the  drawee  is  a  fictitious  person ;  {&) 

3.  By  waiver  of  presentment  express  or  implied,  (c) 

[Note.  —  See  Bills  of  Exchange  Act.  section  46,  subdivision  (2).] 


(a)  Cases,  pp.  524-527.  The  Bills  of 
Exchange  Act  adds:  "  The  fact  that 
the  holder  has  reason  to  believe  that 
the  bill  will,  on  presentment,  be  dis- 
honored, does  not  dispense  with  the 
necessity  for  presentment."  Chalm- 
ers (p.  150),  says:  "  In  some  American 
States  there  is  a  tendency  to  dispense 
with  the  attempt  to  make  presentment 
when    such    attempt  would    be    futile. 


(Foster  v.  Julien,  24  N.  Y.  28.)  This 
tendency  is  of  doubtful  expediency  and 
finds  no  favor  in  England." 

(i>)  Cases,  p.  559,  «(?/f.  This  is  decla- 
ratory. (Smith  V.  Bellamy,  2  Stark. 
223.)  Chalmers,  p.  150.  See  §  185  '2) 
[114],  posi. 

(<r)  On  waiver,  see  §§  180-182  [log- 
in], post.     Cases,  p.  564. 


143.  When  instrument  dishonored  by  non-payment.     [§  83] 

The  instrument  is  dishonored  by  non-payment  when : 

1.  It  is  duly  presented  for  payment  and  payment  is 
refused  or  cannot  be  obtained ;  or 

2.  Presentment  is  excused  and  the  instrument  is  over- 
due and  unpaid. 

[Note.  —  See  Bills  of  Exchange  Act,  section  47,  subdivision  (i).] 


§  144.  Liability  of  person  secondarily  liable,  when  instrument 
dishonored.  [§84] 

Subject  to  the  provisions  of  this  act  (a),  when  the  instru- 
ment is  dishonored  by  non-payment,  an  immediate  right  of 
recourse  to  all  parties  secondarily  liable  (d)  thereon,  accrues 
to  the  holder.  (<:) 

[Note.  —  See  Bills  of  Exchange  Act,  section  47,  subdivision  (2).] 


See  §§  280-289  [161-170],  post. 
See    §    3    [General    Provisions], 


(a) 

ante. 

(c)  Cases,  pp.  474-478.  "As  a  gen- 
eral rule  the  holder's  right  of  actiott 
against  a  drawer  or  indorser  dates  from 
the  time  when  notice  of  dishonor  is  or 
ought  to  be  received  and  not  from  the 


time  when  it  is  sent  (Cartrique  v.  Ber- 
nabo,  6  Q.  B.  498);  and  in  any  case 
there  is  no  right  of  action  till  the  day 
after  dishonor.  The  right  of  recourse 
must  be  distinguished  from  the  right 
of  action.  (Kennedy  v.  Thomas,  1894, 
2  Q.  B.  759.)"  Chalmers,  Bills  of  Ex- 
change Act  (5th  ed.),  p.  152. 


42  THE    NEGOTIABLE    INSTRUMENTS   LAW. 

§  145.  Time  of  maturity.  [§  85] 

Every  negotiable  instrument  is  payable  at  the  time  fixed 
therein  without  grace,  (a)  When  the  day  of  maturity  falls 
upon  Sunday,  or  a  holiday,  the  instrument  is  payable  on  the 
next  succeeding  business  day.  (d)  Instruments  falling  due 
on  Saturday  are  to  be  presented  for  payment  on  the  next 
succeeding  business  day,  except  that  instruments  payable  on 
demand  may,  at  the  option  of  the  holder,  be  presented  for 
payment  before  twelve  o'clock  noon  on  Saturday  when  that 
entire  day  is  not  a  holiday,  (c) 

(a)  [Note.  —  Days  of  grace  have 
been  abolished  in  the  following  States: 
California,  Connecticut,  Idaho,  Illinois, 
Montana,  New  Jersey,  New  York,  Ore- 
gon, Pennsylvania,  Utah,  Vermont, 
Wisconsin.]  Days  of  grace  are  pre- 
served by  the  Bills  of  Exchange  Act, 
§  14:  "  Three  days,  called  days  of 
grace,  are,  in  every  case  where  the  bill 
itself  does  not  otherwise  provide,  added 
to  the  time  of  payment  as  fixed  by  the 
bill,  and  the  bill  is  due  and  payable  on 


the  last  day  of  grace."  Cases,  pp. 234- 
236,  504,  iioie. 

{d)  Where  days  of  grace  are  allowed 
and  the  last  day  of  grace  is  a  holiday, 
the  instrument  is  due  on  the  preceding 
day.      Bills  of  Exchange  Act,  §  14. 

(<r)  [Laws  of  Mass.,  March  30,  1895; 
May  28,  1895.  Laws  of  New  York, 
1887,  ch.  289,  ch.  461;  Laws  of  Penn., 
May  31,  1893;  Laws  of  U.  S.,  Feb.  18, 
1893;  Laws  of  N.  J.,  ch.  43.] 


§  146.  Time  ;  how  computed.  [§  86] 

Where  the  instrument  is  payable  at  a  fixed  period  after 
date,  after  sight,  or  after  the  happening  of  a  specified  event, 
the  time  of  payment  is  determined  by  excluding  the  day  from 
which  the  time  is  to  begin  to  run,  and  by  including  the  date 
of  payment. 

[Note.  —  See  Bills  of  Exchange  Act,  section  14.]  See  New  York  Statutory 
Construction  Law,  §§  26,  27.     Cases,  p.  504,  tzote. 

§  147.  Rule  where  instrument  payable  at  bank.  [§  87] 

Where  the  instrument  is  made  payable  at  a  bank  it  is 
equivalent  to  an  order  to  the  bank  to  pay  the  same  for  the 
account  of  the  principal  debtor  thereon,  (a) 

[Note.  —  ^tna  Nat.  Bank  v.  Fourth  Nat.  Bank,  46  N.  Y.  82;  Commercial 
Bank  v.  Hughes.  17  Wend.  94;  Commercial  Nat.  Bank  v.  Henninger,  105  Pa.  St. 
496;  Bedford  Bank  v.  Acoarn,  125  Ind.  582;  Home  Nat.  Bank  v.  Newton,  8 
Brad  well,  563;   Contra  Grissom  v.  Commercial  Bank,  87  Tenn.  350.] 

(a)     Cases,     p.  521,  note. 

§  148.  What  constitutes  payment  in  due  course.  [§  88] 

Payment  is  made  in  due  course  when  it  is  made  at  or  after 


NOTICE   OF   DISHONOR.  43 

the  maturity  of  the  instrument  to  the  holder  thereof  in  good 
faith  and  without  notice  that  his  title  is  defective,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  59.]     See  §  200  [119].  post. 

(a)     Cases,     pp.    571-579.     See    §    2    faith;  "§  94  [55],  aw/^,  as  to  defective 
[General      Provisions],      a/tte,     as      to    title, 
"  holder;  "  §  95  [56],  ante   as  to  "  good 


ARTICLE  VIII. 

NOTICE  OF  DISHONOR. 

*  Section  160.  To  whom  notice  of  dishonor  must  be  given. 

161.  By  whom  given. 

162.  Notice  given  by  agent. 

163.  Effect  of  notice  given  on  behalf  of  holder. 

164.  Effect  where  notice  is  given  by  party  entitled  thereto. 

165.  When  agent  may  give  notice. 

166.  When  notice  sufficient. 

167.  Form  of  notice. 

168.  To  whom  notice  may  be  given. 

169.  Notice  where  party  is  dead. 

170.  Notice  to  partners. 

171.  Notice  to  persons  jointly  liable. 

172.  Notice  to  bankrupt. 

173.  Time  within  which  notice  must  be  given. 

174.  Where  parties  reside  in  same  place. 

175.  Where  parties  reside  in  different  places. 

176.  When  sender  deemed  to  have  given  due  notice. 

177.  Deposit  in  post  office,  what  constitutes. 

178.  Notice  to  subsequent  parties,  time  of. 

179.  Where  notice  must  be  sent. 

180.  Waiver  of  notice. 

181.  Whom  affected  by  waiver. 

182.  Waiver  of  protest. 

183.  When  notice  dispensed  with. 

184.  Delay  in  giving  notice;  how  excused. 

185.  When  notice  need  not  be  given  to  drawer. 

186.  When  notice  need  not  be  given  to  indorser. 

187.  Notice  of  non-payment  where  acceptance  refused. 

188.  Effect  of  omission  to  give  notice  of  non-acceptance. 

189.  When  protest  need  not  be  made;   when  must  be  made. 

§  160.  To  whom  notice  of  dishonor  must  be  given.  [§  89] 

Except  as  herein  otherwise  provided  {a),  when  a  negotiable 
instrument  has  been  dishonored  by  non-acceptance  (d)  or  non- 
payment  (c),  notice  of  dishonor  must  be  given  to  the  drawer 

*§  [89]  to  §  [118]  in  the  other  States. 


any  liability  on  the  consideration 
therefor.  (Bridges  v.  Berry,  3  Taunt. 
130;  Peacock  v.  Pursell,  14  C.  B.  N.  S. 
728.)"  Chalmers,  Bills  of  Exchange 
Act  (5th  ed.),  p.  153.  For  drawer's  and 
indorser's  contract,  see  §111  [61],  and 
§116  [66],  ante. 


44  ■  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

and  to  each  indorser,  and  any  drawer  or  indorser  to  whom 
such  notice  is  not  given  is  discharged. (rt^) 

[Note.  —  See  Bills  of  Exchange  Act,  section  4S.] 

(a)  See  §§  180-186  \\o<^-\i<^, post. 

(b)  See  §  246  [149], /^jV. 

(c)  See  §  143  [83],  ante, 
{d)  Cases,    p.    528.      "Where   the 

drawer  or  indorser  of  a  bill  is  dis- 
charged from  his  liability  thereon  by 
the  omission  to  give  him  due  notice  of 
dishonor,  he    is    also    discharged    from 

Note.  — A  maker  or  acceptor  is  not  entitled  to  presentment  (§  130  [70],  ante) 
or  notice.  Want  of  notice  of  dishonor  is  no  defense  to  a  guarantor,  unless  he  is 
actually  injured  for  want  of  such  notice.  Brown  v.  Curtis,  2  N.  Y.  225. 
Cases,  p.  487. 

§  161.  By  whom  given.  [§  90] 

The  notice  may  be  given  by  or  on  behalf  of  the  holder,  or 
by  or  on  behalf  of  any  party  to  the  instrument  who  might  be 
compelled  to  pay  it  to  the  holder,  and  who,  upon  taking  it 
up  would  have  a  right  to  reimbursement  from  the  party  to 
whom  the  notice  is  given,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (i);  Daniel  on 
Neg.  Inst.,  sections  987-990.  The  Bills  of  Exchange  Act  uses  only  the  words 
"  holder"  and  "  indorser."  But  the  right  extends  to  any  person  liable  only 
as  a  surety,  whether  he  is  technically  an  indorser  or  not.] 

{a)     Cases,  pp.  528-533. 

§  162.  Notice  given  by  agent.  [§  91] 

Notice  of  dishonor  may  be  given  by  an  agent  either  in  his 
own  name  or  in  the  name  of  any  party  entitled  to  give 
notice,  whether  that  party  be  his  principal  or  not.  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (2);  Daniel  on 
Neg.  Inst.,  sections  991,  992,  and  cases  cited.] 

(a)  Cases,  pp.  531-532  n.  "A  bill  in- 
dorsed by  C  is  held  by  D.  D's  attorney 
gives  notice  of  dishonor  to  the  drawer, 
but  by  mistake  gives  it  in  C's  name 
instead  of  D's.  The  notice  is  suf- 
cient,  provided  C  is  liable  to  D, 
and  has  a  right  of  recourse  against  the 
drawer.     (Harrison  v.  Ruscoe,  15  M.  & 


W.  231.)"  Chalmers,  Bills  of  Ex- 
change Act  (5th  ed.),  p.  155.  "A  party 
entitled  to  give  notice  may  constitute 
the  drawee  or  acceptor  his  agent  for 
the  purpose  of  giving  notice  of  dis- 
honor. (Rosher  v.  Kieran,  4  Camp. 
87,  as  modified  by  Harrison  v.  Ruscoe, 
15  M.  &  W.,  at  p.  235.)  "     lb. 


§  163.  Effect  of  notice  given  on  behalf  of  holder.  [§  92] 

Where  notice  is  given  by  or  on  behalf  of  the  holder,  it 


NOTICE   OF   DISHONOR.  45 

enures  for  the  benefit  of  all  subsequent  holders  and  all  prior 
parties  who  have  a  right  of  recourse  against  the  party  to 
whom  it  is  given,  {a) 

[Note. — See  Bills  of  Exchange  Act,  section  49,  subdivision  (3);  Daniel  on 
Neg.  Inst.,  section  990.] 

{a)     Cases,  pp.  530-533- 

§  164.  Effect  where  notice  is  given  by  party  entitled  thereto. 

[§93] 
Where  notice  is  given  by  or  on  behalf  of  a  party  entitled 
to  give  notice,  it  enures  for  the  benefit  of  the  holder  and  all 
parties  subsequent  to  the  party  to  whom  notice  is  given,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (4);  Daniel  on 
Neg.  Inst.,  section  990.]  "  In  a  New  York  case  it  was  held  that  a  notice  duly 
sent  by  the  holder  did  not  enure  for  the  benefit  of  a  prior  indorser  when  it  did 
not  reach  the  party  to  whom  it  was  sent,  but  the  circumstances  of  the  case  were 
somewhat  special.  (Beale  v.  Parish,  20  N.  Y.  407.)  The  Act  does  not  counte- 
nance this  view."  Chalmers,  Bills  of  Exchange  Act  (5th  ed.),  pp.  156-7. 
Chalmers  cites  Chapman  v.  Keane,  3  A.  &  E.  193;  Lysaght  v.  Bryant,  19  L.  J. 
C.  P.  160;  Streeter  v.  Fort  Bank,  34  N.  Y.  413. 

{a)     Cases,  pp.  530-533. 

§  165    When  agent  may  give  notice.  [§  94] 

Where  the  instrument  has  been  dishonored  in  the  hands  of 
an  agent,  he  may  either  himself  give  notice  to  the  parties 
liable  thereon,  or  he  may  give  notice  to  his  principal.  If  he 
give  notice  to  his  principal,  he  must  do  so  within  the  same 
time  as  if  he  were  the  holder,  and  the  principal  upon  the 
receipt  of  such  notice  has  himself  the  same  time  for  giving 
notice  as  if  the  agent  had  been  an  independent  holder,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (13).]  "A  bill 
Dayable  in  London  is  indorsed  in  blank  by  the  holder,  and  deposited  with  a 
country  banker  for  collection.  The  country  banker's  London  agent  presents  it 
for  payment  and  gives  him  due  notice  of  its  dishonor.  The  country  banker  on 
the  day  after  the  receipt  of  such  notice  gives  notice  to  his  customer,  who  in 
turn  gives  similar  notice  to  his  indorser.  The  indorser  has  received  due  notice. 
(Bray  v.  Hadwen,  5  M.  &  S.  68.  See  also  Clode  v.  Bayley.  12  M.  &  W.  51; 
Prince  v.  Oriental  Bank,  L.  R.  3  App.  Cas.,  at  p.  332.)  "  Chalmers,  Bills  of 
Exchange  Act  (5th  ed.),  p.  162. 

[a)     Cases,  pp.  532-533- 

§  166.  When  notice  sufficient.  [§  95] 

A  written  notice  need  not  be  signed  {a)  and  an  insufficient 
written  notice  may  be  supplemented  and  validated  by  verbal 


46 


THE   NEGOTIABLE   INSTRUMENTS   LAW. 


communication,  {b)  A  misdescription  of  the  instrument  does 
not  vitiate  the  notice  unless  the  party  to  whom  the  notice  is 
given  is  in  fact  misled  thereby,  {c) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (7).  Byles  on 
Bills,  276;  Daniel  on  Neg.  Inst.,  sections  97ga-98o.  Subdivision  (6)  of  section 
49  of  the  Bills  of  Exchange  Act,  which  reads  "  Return  of  a  dishonored  bill  to  the 
drawer  or  an  indorser  is  in  point  of  law  deemed  a  sufficient  notice  of  dishonor  " 
is  omitted.  In  his  note  to  that  sub-section,  Judge  Chalmers  says:  "  This  sub- 
section approves  a  common  practice  of  collecting  bankers  which  was  previously 
of  doubtful  validity."     No  such  practice  prevails  in  this  country.] 

(Bromage  v.  Vaughan,  16  L.  J.  O.  B. 
10),  or  which  describes  a  bill  of  ex- 
change as  a  note  (Stockman  v.  Parr,  11 
M.  &  W.  809;  Bain  v.  Gregory,  14  L. 
T.  N.  S.  601),  or  which  transposes  the 
names  of  the  drawer  and  acceptor  (Mel- 
lersh  V.  Rippen,  7  Exch.  57S),  or  which 
describes  the  acceptor  by  a  wrong 
name  (Harpham  v.  Child,  i  F.  &  F. 
652),  may  be  sufficient."  Chalmers, 
Bills  of  Exchange  Act  (5th  ed.),  p.  159. 


{a)  But  it  must  come  from  the  right 
person.  See  §§  161-162  [90-91],  ajite. 
See  Maxwell  v.  Brain,  10  L.  T.  N.  S. 
301. 

{b)  The  sufficiency  or  insufficiency 
in  such  case  is  a  question  of  fact. 
Houlditch  V.  Canty,  4  Bing.  N.  C.  411; 
Metcalfe  v.  Richardson,  11  C.  B.  loii. 

{c)  Cases,  pp.  533-534-  "A  notice 
to  the  drawer  which  describes  the  bill 
as  payable  at  the  '  S  Bank,'  when  in 
fact  it   was   payable   at  the  '  T  Bank  ' 


§  167.   Form  of  notice.  [§  9^1 

The  notice  may  be  in  writing  or  merely  oral  {a)  and  may 
be  given  in  any  terms  which  sufficiently  identify  the  instru- 
ment, and  indicate  that  it  has  been  dishonored  by  non-accept- 
ance or  non-payment,  {b)  It  may  in  all  cases  be  given  by 
delivering  it  personally  or  through  the  mails,  (r) 


{a)  [See  Bills  of  Exchange  Act,  sec- 
tion 49,  subdivision  (5);  Cuyler  v.  Ste- 
vens, 4  Wend.  566;  Glasgow  v.  Pratte, 
8  Mo.  336;  Byles  on  Bills,  271;  Daniel 
on  Neg.  Inst.,  section  972.] 

{b)  Cases,  pp.  534-537-  [Byles  on 
Bills,  976;  Daniel  on  Neg.  Inst.,  sec- 
tions 793-978.  The  statement  that  the 
holder  looks  for  payment  to  the  party 
to  whom  notice  is  sent  is  not  neces- 
sary; for  this  is  implied  from  the  fact 
of  giving  notice.  Bank  of  U.  S.  v.  Car- 
neal,  2  Peters,  543;  Mills  v.  Bank,  11 
Wheat.  431,  436;  Nelson  v.  First  Nat. 
Bank  (U.  S.  Circuit  Ct.  App.),  69  Fed. 
Rep.  798,  801.]  "  Notices  of  dishonor 
are  now  construed  very  liberally.  In 
1834  the  House  of  Lords,  in  Solarte  v. 
Palmer  i  Bing.  N.  C.  194,  decided  that 


the  notice  must  inform  the  holder, 
either  in  terms  or  by  necessary  impli- 
cation, that  the  bill  had  been  presented 
and  dishonored.  This  inconvenient 
decision  was  frequently  regretted  (see 
e.  g.,  Everarad  v.  Watson,  i  E.  &  B., 
at  p.  804),  and  was  eventually  got  rid 
of  by  considering  it  merely  a  finding 
on  the  particular  facts.  (Paal  v.  Joel, 
27  L.  J.  Ex.,  at  p.  384.)  Since  1841  (see 
Furz  V.  Sharwood,  2  Q.  B.  388,  where 
the  notice  would  now  probably  be  suffi- 
cient), it  does  not  appear  that  any  writ- 
ten notice  of  dishonor  has  been  held 
bad  on  the  ground  of  insufficiency  in 
form."  Chalmers,  Bills  of  Exchange 
Act  (5th  ed.),  p.  158. 

{c)     Cases,    pp.    537-538-     See   §    177 
{loi)],  post,  and  §  179  {las'],  post. 


NOTICE   OF   DISHONOR.  47 

§  168.  To  whom  notice  may  be  given.  [§  97] 

Notice  of  dishonor  may  be  given  either  to  the  party  him- 
self or  to  his  agent  in  that  behalf,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (8).  Fassin  v. 
Hubbard,  55  N.  Y.  465,  471 ;  Lake  Shore  Nat.  Bank  v.  Butler  Colliery  Co.,  51 
Hun,  63,  68.] 


(a)  Cases,  pp.  540-541.  "  It  is  the 
duty  of  the  drawer  or  indorser  of  a  bill, 
if  he  be  absent  from  his  place  of  busi- 
ness or  residence,  to  see  that   there  is 


some  person  there  to  receive  notice  on 
his  behalf."  Chalmers,  p.  160,  citing 
Allen  V.  Edmundson,  2  Exch.,  at  p.  723. 


§  169.  Notice  where  party  is  dead.  [§  98] 

When  any  party  is  dead,  and  his  death  is  known  to  the 
party  giving  notice,  the  notice  must  be  given  to  a  personal 
representative,  if  there  be  one,  and  if  with  reasonable  dili- 
gence, he  can  be  found,  (a)  If  there  be  no  personal  repre- 
sentative, notice  may  be  sent  to  the  last  residence  or  last 
place  of  business  of  the  deceased.  (/;) 

(a)  Cases,  pp.  540-541.  [See  Bills  1  Mass.  82;  Bealls  v.  Peck,  12  Barb, 
of  Exchange  Act,  section  49,  subdivi- I  245;  Cayuga  Co.  Bank  v.  Bennett,  5 
sion  (9).     The 'statement  is  based  upon  I  Hill,  236;    Maspero   v.    Pedesclaux,    22 


the  American  decisions.  Massachu- 
setts Bank  v.  Oliver,  10  Cush.  557; 
Merchants'  Bank  v.  Birch,  17  Johns.  24. 
See  also  Smalley  v.  Wright,  40  N.  J. 
Law,    471;    Goodnow    v.    Warren,    122 


La.  Ann.  227.] 

{d)  Cases,  pp.  540-541.  [Goodnow 
V.  Warren,  122  Mass.  82;  Merchants' 
Bank  v.  Birch,  17  Johns.  25.] 


§  170.  Notice  to  partners.  [§  99] 

Where  the  parties  to  be  notified  are  partners  notice  to  any 
one  partner  is  notice  to  the  firm  even  though  there  has  been 
a  dissolution,  (a) 

(a)     Cases,  pp.  541-542.     [See  Coster  j  Matthews,  54  N.  Y.  43,  50;   Fourth  Nat. 
V.  Thomason,  19  Ala.  717;  Slocomb  v.    Bank  v.  Henschuh,  52  Mo.  207.] 
Lizardi,  21   La.  Ann.  355;    Hubbard  v,  | 

§  171.  Notice  to  persons  jointly  liable.  [§  loo] 

Notice  to  joint  parties  who  are  not  partners  must  be  given 
to  each  of  them,  unless  one  of  them  has  authority  to  receive 
such  notice  for  the  others,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (11).  The  rule  is 
based  upon  the  American  decisions.  Willis  v.  Green,  5  Hill,  232.  See  also 
Daniel  on  Neg.  Inst.,  section  999a,  and  cases  cited.] 

(a)     Cases,  p.  542  n. 


48  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

§  172.  Notice  to  bankrupt.  [§  loi] 

Where  a  party  has  been  adjudged  a  bankrupt  or  an  insolv- 
ent, or  has  made  an  assignment  for  the  benefit  of  creditors, 
notice  may  be  given  either  to  the  party  himself  or  to  his 
trustee  or  assignee,  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (10).  Daniel  on 
Neg.  Inst.,  section  1002;  Callahan  v.  Kentucky  Bank,  S2  Ky.  231;  Contra, 
House  V.  Vinton  Bank,  43  Ohio  St.  346.]  "All  that  had  been  decided  before 
the  Act  was  that  notice  given  to  the  bankrupt  in  ignorance  that  a  trustee  had 
been  appointed  was  sufficient."     Chalmers,  p.  160. 

{a)     Cases,  p.  542  n. 

§  173.  Time  within  which  notice  must  be  given.  [§  102] 

Notice  may  be  given  as  soon  as  the  instrument  is  dishon- 
ored {a) ;  and  unless  delay  is  excused  as  hereinafter  provided, 
must  be  given  within  the  times  fixed  by  this  act.  {b) 

{a)     Cases,    pp.    542-552.     [Bank    of  1 49.     subdivision      (12).       The      phrase 


Alexandria  v.  Swan,  9  Peters, 
Lenox  v.  Roberts,  2  Wheat.  373 ;  Ex  parte 
Moline,  19  Ves.  216;  Daniel  on  Neg- 
Inst.,  section  1036.]  Bills  of  Exchange 
Act,  section  49,  subdivision  (12). 

{b)     [Bills  of   Exchange  Act,  section 


must  be  given  within  a  reasonable 
time  thereafter,"  used  in  the  Bills  of 
Exchange  Act,  is  omitted;  for  the  time 
is  definitely  fixed  and  this  language 
has  no  force.] 


§  174.  Where  parties  reside  in  same  place.  [§  103] 

Where  the  person  giving  and  the  person  to  receive  notice 
reside  in  the  same  place,  notice  must  be  given  within  the 
following  times: 

1.  If  given  at  the  place  of  business  of  the  person  to 
receive  notice,  it  must  be  given  before  the  close  of  busi- 
ness hours  on  the  day  following ;  {a) 

2.  If  given  at  his  residence,  it  must  be  given  before 
the  usual  hours  of  rest  on  the  day  following ;  {b) 

3.  If  sent  by  mail,  it  must  be  deposited  in  the  post- 
office  in  time  to  reach  him  in  usual  course  on  the  day 
following.  (<;-) 

{a)  Cases,  pp.  542-543-  [See  Adams  {c)  Cases,  p.  544  n.  [This  rule  is 
v.  Wright,  14  Wis.  40S;  Cayuga  County  that  of  the  Bills  of  Exchange  Act  (§  49, 
Bank  v  Hunt,  2  Hill,  236;  Daniel  on  subsec.  12),  and  is  in  accordance  with 
Neg.  Inst.,  section  1038.]  the  practice  in   New  York  City.     Some 

{b)  Cases,  p.  543  n.  [See  Phelps  v.  of  the  decisions  deem  service  through 
Stocking,  21  Neb.  444;  Darbishire  v.  the  post-office  insufficient,  unless  there 
Parker,  6  East,  8.]  is  proof  that  the  notice  was  actually  re- 


NOTICE   OF   DISHONOR. 


49 


ceived  in  due  time.  (See  Daniel  on 
Neg.  Inst.,  section  1005,  and  cases 
cited.)     But    this    rule    would    be    ex- 


tremely  inconvenient  in  large  places.] 
See  next  sectio 


§  175.  Where  parties  reside  in  different  places.  [§  104] 

Where  the  person  giving  and  the  person  to  receive  notice 
reside  in  different  places,  the  notice  must  be  given  within 
the  following  times : 

1.  If  sent  by  mail,  it  must  be  deposited  in  the  post- 
office  in  time  to  go  by  mail  the  day  following  the  day  of 
dishonor,  or  if  there  be  no  mail  at  a  convenient  hour  on 
that  day,  by  the  next  mail  thereafter,  {a) 

2.  If  given  otherwise  than  through  the  post-office, 
then  within  the  time  that  notice  would  have  been 
received  in  due  course  of  mail,  if  it  had  been  deposited 
in  the  post-office  within  the  time  specified  in  thelast  sub- 
division, {b) 


(a)  Cases,  pp.  544-548.  [This  is 
substantially  the  same  as  the  Bills  of 
Exchange  Act,  section  49,  subdivision 
(12)  {b).  It  is  supported  by  numerous 
American  decisions.  See  Daniel  on 
Neg.  Inst.,  sections  1039-1041.] 


{b)  Cases,  pp.  549-550.  [See  Bank 
of  Columbia  v.  Lawrence,  i  Peters,  578; 
Jarvis  v.  St.   Croix   Mfg.   Co.,   23   Me. 

287.] 


§  176.  When  sender  deemed  to  have  given  due  notice.  [§  105] 

Where  notice  of  dishonor  is  duly  addressed  and  deposited 
in  the  post-office,  the  sender  is  deemed  to  have  given  due 
notice,  notwithstanding  any  miscarriage  in  the  mails,  {a) 


[Note. — See  Bills  of  Exchange  Act, 
Bills,  277.] 

(a)  Cases,  p.  544.  "  It  lies  on  the 
sender  to  prove  that  the  letter  con- 
taining the  notice  was  duly  addressed 
and  posted.  (Hawkes  v.  Salter,  4 
Bing.  715;  cf.  Skilbeck  v.  Garbett,  7  Q. 
B.  846.)  The  sufficiency  of  the  direction 
on  the  letter  is  a  question  of  reasonable 
diligence.  If  the  drawer  or  indorser  has 
a  place  of  business,  the  notice  should 
be  addressed  to  him  there;  if  he  has  not, 
then  it  should  be  addressed  to  him  at 
his  residence,  and  the  party  giving  no- 


section  49,  subdivision  (15);   Byles  on 

tice  is  bound  to  use  reasonable  diligence 
to  discover  such  place  of  business  or 
residence.  (Berridge  v.  Fitzgerald,  L. 
R.  4  Q.  B.  639.)  When,  however,  the  bill 
contains  an  address  it  seems  that  such 
address  is  in  any  case  sufficient  to 
charge  the  party  giving  that  address. 
(Burmester  v.  Barron,  17  Q.  B.  828;  cf. 
Ex  parte  Baker,  L.  R.  4  Ch.  D.  at  p. 
799.)  Chalmers,  Bills  of  Exchange  Act 
(5th  ed.),  pp.  155-6. 


§  177.  Deposit  in  post-office  ;  what  constitutes.  [§  106I 

Notice  is  deemed  to  have  been  deposited  in  the  post-office 


NEGOT.   INSTRUMENTS- 


so  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

when  deposited  in  any  branch  post-office  or  in  any  letter  box 
under  the  control  of  the  post-office  department,  {a) 

[Note.  —  See  Casco  Nat.  Bank  v.  Shaw,  79  Me.  376;  Pearce  v.  Langfit,  loi 
Pa.  St.  507.] 

(a)     Cases,  p.  539. 

§  178.  Notice  to  subsequent  party  ;  time  of.  [§  107] 

Where  a  party  receives  notice  of  dishonor,  he  has,  after 
the  receipt  of  such  notice,  the  same  time  for  giving  notice  to 
antecedent  parties  that  the  holder  has  after  the  dishonor,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (14;;  Daniel  on 
Neg.  Inst.,  section  1044;   Byles  on  Bills,  283.] 

{a)     Cases,    pp.    550-552.     See    §   165  [94],  arJe,   note. 

§  179.  Where  notice  must  be  sent.  [§  io8] 

Where  a  party  has  added  an  address  to  his  signature, 
notice  of  dishonor  must  be  sent  to  that  address  (a) ;  but  if  he 
has  not  given  such  address,  then  the  notice  must  be  sent  as 
follows : 

1.  Either  to  the  post-office  nearest  to  his  place  of  resi- 
dence, or  to  the  post-office  where  he  is  accustomed  to 
receive  his  letters ;  (d)  or 

2.  If  he  live  in  one  place,  and  have  his  place  of  business 
in  another,  notice  may  be  sent  to  either  place ;  (c)  or 

3.  If  he  is  sojourning  in  another  place,  notice  may  be 
sent  to  the  place  where  he  is  so  sojourning,  (d) 

But  where  the  notice  is  actually  received  by  the  party 
within  the  time  specified  in  this  act,  it  will  be  sufficient, 
though  not  sent  in  accordance  with  the  requirements  of  this 
section. 


(a)  Cases,  p.  552.  Note  to  §  176 
[105],  anie. 

{6)  Cases,  pp.  553-554-  [See  Bank 
of  Columbia  v.  Lawrence,  i  Peters, 
578;  National  Bank  v.  Cade,  73  Mich. 
449;  Northwestern  Coal  Co.  v.  Bow- 
man, 69  Iowa,  103.] 


(<r)  Cases,  pp.  553-554-  [Bank  of 
U.  S.  V.  Carneal,  2  Peters,  549;  Wil- 
liams V.  Bank  of  U.  S.,  2  Peters,  96; 
Montgomery  Co.  Bank  v.  Marsh,  7  N. 
Y.  481.] 

((/)  Cases,  pp.  554-556.  [Chouteau 
V.  Webster,  6  Met.  i.] 


§  180.  Waiver  of  notice.  [§  109] 

Notice  of  dishonor  may  be  waived,  either  before  the  time 
of  giving  notice  has  arrived  (^),  or  after  the  omission  to  give 
due  notice  (^),  and  the  waiver  may  be  express  or  implied,  (c) 


NOTICE    OF   DISHONOR. 


51 


[Note.  —  See   Bills  of  Exchange  Act 
Neg.  Inst.,  sections  1147-1168;  Byles  on 

{a)     Cases,  pp.  564-565. 

{l>)     Cases,  pp.  565-567- 

(c)  For  waiver  of  presentment  see 
§  142  [82],  a  nit'.  "  Waiver  of  notice  of 
dishonor  in  favor  of  the  holder  enures 
for  the  benefit  of  parties  prior  to  such 
holder  as  well  as  subsequent  holders. 
(Rabey  v.  Gilbert,  30  L.  J.  Ex.  170.) 
Waiver  of  notice  of  dishonor  by  an  in- 
dorser  does  not  affect  parties  prior  to 
such  indorser.  (Turner  v.  Leech,  4  B. 
&  Aid.  451.)  An  acknowledgment  of 
liability  must  be  made  with  full  knowl- 
edge of  the  facts  in  order  to  operate  as 
a  waiver  of  notice  of  dishonor.  (Good- 
all  V.  Dolley,  i  T.  R.  712;  cf.  Pickin  v. 
Graham,  i  Cr.  &  M.,  at  p.  729.)  Many 
of  the  cases  fail  to  distinguish  between 
admissions  of  liability,  which  are  evi- 
dence of  due  notice  having  been  re- 
ceived, and  admissions  of  liability 
when  due   notice   has   not  been  given, 


,  section  50,  subdivision  (2);  Daniel  on 
Bills,  293.] 

and  which  therefore  are  evidence  of 
waiver.  The  distinction  is  important. 
(As  to  what  is  evidence  of  due  notice, 
see  Taylor  v.  Jones,  2  Camp.  105 ;  Hicks 
V.  Beaufort,  4  Bing.  N.  C.  229;  Brow- 
nell  V.  Bonney,  i  Q.  B.  39;  Curlewis 
V.  Corfield,  i  Q.  B.  S14;  Campbell  v. 
Webster,  15  L.  J.  C.  P.  4;  Mills  v.  Gib- 
son, 16  L.  J.  C.  P.  249;  Jackson  v.  Col- 
lins, 17  L.  J.  Q.  B.  142;  Bartholomew 
V.  Hill,  5  L.  T.  X.  S.  756.  As  to  what 
is  not,  Borradaile  v.  Lowe,  4  Taunt. 
93;  Braithwaite  v.  Coleman,  4  X.  &  M. 
654;  Bell  V.  Frankis.  4  M.  &  G.  446; 
Holmes  v.  Staines.  3  C.  &  K.  19.)  In 
America  it  has  been  held  that  a  verbal 
waiver  of  notice  may  be  revoked  before 
the  time  for  giving  notice  has  expired. 
(Second  Nat.  Bank  v.  Mcguire,  31  Am. 
R-  539;  s.  c,  33  Oh.  St.  295).  Chalm- 
ers, Bills  of  Exchange  Act  (5th  ed.), 
pp.  166-7. 


§  181.  Whom  affected  by  waiver.  [§  no] 

Where  the  waiver  is  embodied  in  the  instrument  itself,  it  is 
binding  upon  all  parties  {a) ;  but  where  it  is  written  above 
the  signature  of  an  indorser,  it  binds  him  only,  {d) 

(a)  Cases,  pp.  564-565 «.  [See  Pool  v.  1  an  indorsement  in  the  above  form 
Anderson.  116  Ind.  94;  Bryant  v.  Mer- |  dispenses  with  the  necessity  of  notice 
chants'  Bank,  8  Bush.  43.]  |  to   all    subsequent    indorsers    (Daniel, 

{/>)  [Woodman  v.  Thurston,  S  Cush.  §  1090;  Parshley  v.  Heath,  69  Me.  90); 
157;  Farmers'  Bank  v.  Ewing,  78  Ky.  and  in  France  a  similar  construction 
264.]     "  Such  an  indorsement  is  some-    has  been   put  on   the  phrases  '^  Retour 


times  spoken  of  as  a  facultative  indorse- 
ment. It  relates  only  to  the  indirser's 
liability,  and  does  not  otherwise  affect 
the  negotiation  of  the  bill.  Such  stipu- 
lations are  resorted  to  when  the  pay- 
ment of  the  bill  is  doubtful,  and  the 
drawer  or  indorser  wishes  to  save  ex- 
pense in  case  of  its  return.  In  the 
United    States   it    has    been    held    that 


sans  frais^^  ''  Retour  sans  protet,''  and 
'sans  compte  de  retour.'  (Nouguier, 
§  250;  Gcn-.an  Exchange  Law,  art.  42. 
seems  ambiguous)  It  is  doubtful 
whether  the  English  Act  would  bear 
such  an  interpretation."  Chalmers, 
Bills  of  Exchange  Act  (5th  ed.),  p.  40. 
The  aLove  section  fixes  the  law  con- 
trary to  Parshley  v.  Heath,  supra. 


§182.  Waiver  of  protest.  [§  m] 

A  waiver  of  protest,  whether  in  the  case  of  a  foreign  bill 
of  exchange  {a)  or  other  negotiable  instrument  {b),  is  deemed 


52  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

to  be  a  waiver  not  only  of  a  formal  protest,  but  also  of  pre- 
sentment and  notice  of  dishonor,  (c) 


(a)     [See    Union    Bank    v.    Hyde,    6 
Wheat,  572;    Brown   v.  Hull,  33  Gratt. 

31.] 

(1^)     [Pool  V.  Anderson,  116  Ind.   94; 


Welford    v.    Andrews,    29    Minn.    251; 
Coddington    v.     Davis,    i     N.    Y.    1S6; 
Daniel  on  Neg.  Inst.,  section  1095a. 
(r)     Cases,  pp.  566-567. 


§  183.  When  notice  is  dispensed  with.  [§  112] 

Notice  of  dishonor  is  dispensed  with  when,  after  the  exer- 
cise of  reasonable  diligence,  it  cannot  be  given  to  or  does  not 
reach  the  parties  sought  to  be  charged,  (a) 

[Note.  —  See  Bills  of  Exchange  .\ct,  section  50,  subdivision  (2).] 
((?)     Cases,  pp.  563-564. 

§  184.  Delay  in  giving  notice  ;  how  excused.  [§  113] 

Delay  in  giving  notice  of  dishonor  is  excused  when  the 
delay  is  caused  by  circumstances  beyond  the  control  of  the 
holder  and  not  imputable  to  his  default,  misconduct  or  negli- 
gence. When  the  cause  of  delay  ceases  to  operate,  notice 
must  be  given  with  reasonable  diligence,  {a) 

[Note. — See  Bills  of  Exchange  Act,  section  50;  Daniel  on  Neg.  Inst.,  sec- 
tions 1059-1146.  A  more  specific  statement  of  what  will  excuse  delay  is 
deemed  impracticable.  Any  attemot  to  enumerate  particular  instances  would 
lead  to  confusion.] 

((7)     Cases,  pp.  556-558. 

§  185.  When  notice  need  not  be  given  to  drawer.  [§  114] 

Notice  of  dishonor  is  not  required  to  be  given  to  the  drawer 
in  either  of  the  following  cases : 

1.  Where    the     drawer     and    drawee    are    the    same 
person ;  (a) 

2.  Where  the  drawee  is  a  fictitious  person  or  a  person 
not  having  capacity  to  contract ;  (d) 

3.  Where  the  drawer  is  the  person  to  whom  the  instru- 
ment is  presented  for  payment ;  (c) 

4.  Where  the  drawer  has  no  right  to  expect  or  require 
that  the  drawee  or  acceptor  will  honor  the  instrument ;  (d) 

5.  Where  the  drawer  has  countermanded  payment.  (/) 


(a)  Cases,  pp.  55S-559-  [See  Bills 
of  Exchange  Act,  section  50,  subdivi- 
sion (2)  ((■);  Daniel  on  Neg.  Inst.,  sec- 
tions 128-129,  1088a.]  See  '  person ' 
defined,  g  2  [General  Provisions],  cinte. 


{(>)       IlK,    \_Ib.-\ 
(<■)       lb.,   lIb.-\ 

{d)  Cases,  pp.  560-561.  [Life  Insur- 
ance Company  v.  Pendleton,  112  U.  S. 
70S;     Daniel    on    Neg.    Inst.,    sections 


NOTICE   OF   DISHONOR. 


53 


1074,  1076.  The  language  of  the  Bills 
of  Exchange  Act  is  "  where  the  drawee 
or  acceptor  is  as  between  himself  and 
the  drawer  under  no  obligation  to  accept 
or  pay  the  bill."  But  this  is  too  nar- 
row.    It    is    not    required    that    there 


should  be  any  obligation  to  accept. 
See  Adams  v.  Darby,  28  Mo.  162;  Dick- 
ens V.  Beal,  10  Peters,  572.] 

(f)  [Sutcliffe  V.  McDowell,  2  Nott. 
&  M'C.  251;  Daniel  on  Neg.  Inst., 
section  loSi.] 


§  186.  When  notice  need  not  be  given  to  indorser.         [§  115] 

Notice   of   dishonor   is   not   required   to   be   given   to   an 
indorser  in  either  of  the  following  cases : 

1.  Where  the  drawee  is  a  fictitious  person  or  a  person 
not  having  capacity  to  contract,  and  the  indorser  was 
aware  of  the  fact  at  the  time  he  indorsed  the  instru- 
ment ;  {a) 

2.  Where  the  indorser  is  the  person  to  whom  the 
instrument  is  presented  for  payment ;  (/?) 

3.  Where  the  instrument  was  made  or  accepted  for  his 
accommodation,  {c) 

[Note.  —  See  Bills  of  Exchange  Act,  section  50,  subdivision  (2)  {d).'\ 


(a)    See  preceding  section,  note  {l>). 
(i)    Cases,  pp.  561-563.     See  preced- 
ing section,  note  (<;) 


(c)    Cases,  p.  563. 


§  187.  Notice  of  non-payment  where  acceptance  refused. 

[§  116] 

Where  due  notice  of  dishonor  by  non-acceptance  has  been 
given,  notice  of  a  subsequent  dishonor  by  non-payment  is 
not  necessary,  unless  in  the  meantime  the  instrument  has 
been  accepted,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  48,  subdivision  (2);  Daniel  on 
Neg.  Inst.,  section  932.] 

(a)     Cases,  p.  568. 


§  188.  Effect  of  omission  to  give  notice  of  non-acceptance. 

[§  117] 

An  omission  to  give  notice  of  dishonor  by  non-acceptance 
does  not  prejudice  the  rights  of  a  holder  in  due  course  subse- 
quent to  the  omission,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  48,  subdivision  (i).] 
(a)     Cases,  p.  528  n. 


54  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

§  189.  When  protest  need  not  be  made  ;  when  must  be  made. 

[§  118] 

Where  any  negotiable  instrument  has  been  dishonored  it 

may  be  protested  for  non-acceptance  or  non-payment,  as  the 

case  may  be ;  but  protest  is  not  required,  except  in  the  case 

of  foreign  bills  of  exchange,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  51,  subdivision  (i);  Daniel  on 
Neg.  Inst.,  sections  926,  928;  Byles  on  Bills,  260.  For  the  other  provisions 
relative  to  protests  see  sections  152  and  160.     (N.  Y.,  gg  260  and  26S.)] 

(«)     Cases,  pp.  568-570. 


ARTICLE  IX. 

DISCHARGE  OF  NEGOTIABLE  INSTRUMENTS. 

^Section   200.   Instrument  ;  how  discharged. 

201.  When  persons  secondarily  liable  on,  discharged. 

202.  Right  of  party  who  discharged  instrument. 

203.  Renunciation  by  holder. 

204.  Cancellation;  unintentional;  burden  of  proof. 

205.  Alteration  of  instrument  ;   effect  of. 

206.  What  constitutes  a  material  alteration. 

§  200.  Instrument ;  how  discharged.  [§  119] 

A  negotiable  instrument  is  discharged : 

1.  By  payment  in  due  course  by  or  on  behalf  of  the 
principal  debtor ;  (a) 

2.  By  payment  in  due  course  by  the  party  accommo- 
dated, where  the  instrument  is  made  or  accepted  for 
accommodation ;  (/;) 

3.  By  the  intentional  cancellation  thereof  by  the 
holder ;  (c) 

4.  By  any  other  act  which  will  discharge  a  simple  con- 
tract for  the  payment  of  money;  (</) 

5.  When  the  principal  debtor  becomes  the  holder  of 
the  instrument  at  or  after  maturity  in  his  own  right,  {e) 

[Note.  —  See  Bills  of  Exchange  Act,  sections  59,  61,  63.] 


(tf)  Cases,  pp.  571-577-  See  g  14S 
[88],  ante. 

{b)  Cases,  pp.  578-579-  See  g  55 
[29],  ante. 


{c)  Cases,  pp.  579-585-  See  g  204 
[123],  post. 

{d)    Cases,  p.  585  et  seq. 

{e)  Cases,  pp.  57S-579.  See  g  80 
[50],  ante. 


*g  [119]  to  g  [125]  in  the  other  States. 


DISCHARGE    OF   NEGOTIABLE    INSTRUMENTS. 


55 


§  201.  When  persons  secondarily  liable  on,  discharged.  f§  120J 

A  person  secondarily  liable  on  the  instrument  is  discharged : 

1.  By  any  act  which  discharges  the  instrument;  (a) 

2.  By  the  intentional  cancellation  of  his  signature  by 
the  holder ;  (/;) 

3.  By  the  discharge  of  a  prior  party ;  {c) 

4.  By  a  valid  tender  of  payment  made  by  a  prior 
party ;  {d) 

5.  By  a  release  of  the  principal  debtor,  unless  the 
holder's  right  of  recourse  against  the  party  secondarily 
liable  is  expressly  reserved ;  (r) 

6.  By  any  agreement  binding  upon  the  holder  to  extend 
the  time  of  payment  or  to  postpone  the  holder's  right  to 
enforce  the  instrument,  unless  the  right  of  recourse 
against  such  party  is  expressly  reserved.  (/) 


(a)     See  preceding  section. 

(0)  See  §  78  [48],  anh'.  [See  Bills  of 
Exchange  Act,  section  63.]  Ingham  v. 
Primrose,  7  C.  B.  N.  S.  82;  Ralli  v.  Den- 
nistoun,  6  Exch.  483;  Bank  of  Scotland 
V.  Dominion  Bank,  1891,  A.  c.  592. 

(r)  Cases,  pp.  592-593.  [Daniel  on 
Neg.  Inst.,  section  1307.] 


((/)  Cases,  pp.  593-594.  ["Spurgeon 
V.  Smiths,  114  Ind.  453.] 

(e)  Cases,  pp.  594-596.  [Daniel  on 
Neg.  Inst.,  section  1310.] 

(/)  Cases,  pp.  596-59S.  [Daniel  on 
Neg.  Inst.,  section  1326-13883.] 

See  also  cases,  pp.  598-599. 


§  202.  Right  of  party  who  discharges  instrument.  [§  121J 

Where  the  instrument  is  paid  by  a  party  secondarily  liable 
thereon,  it  is  not  discharged ;  but  the  party  so  paying  it  is 
remitted  to  his  former  rights  as  regards  all  prior  parties, 
and  he  may  strike  out  his  own  and  all  subsequent  indorse- 
ments, and  again  negotiate  the  instrument,  except : 

1,  Where  it  is  payable  to  the  order  of  a  third  person, 
and  has  been  paid  by  the  drawer;  (a)  and 

2.  Where  it  was  made  or  accepted  for  accommodation, 
and  has  been  paid  by  the  party  accommodated.  (/;) 

[Note.  —  See  Bills  of  Exchange  Act,  section  59;  Daniel  on  Neg.  Inst.,  sec- 
tions 12353-1241.]  This  section  is,  perhaps,  not  altogether  clear.  Exception  (i) 
qualifies  the  last  clause  beginning  "  and  he  may  strike  out,"  etc.,  while  excep- 
tion (2)  qualifies  the  whole  of  the  preceding  statement.  If  the  instrument  is 
paid  by  the  party  accommodated,  it  is  discharged  under  the  provisions  of 
§  200  (i)  [iig  (i)]  If  paid  by  a  drawer  of  a  bill  payable  to  the  order  of  a  third 
person,  the  drawer  Cnot  being  an  accommodated  party),  may  enforce  payment 
against  th°  acceptor  but  may  not  re-issue  the  bill.     If  paid  by  an  indorser,  or 


$6  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

by  a  drawer  of  a  bill  payable  to  drawer's  order,  the  party  paying  (not  being  an 
accommodated  party),  may  enforce  payment  against  prior  parties  or  may  strike 
out  his  own  and  subsequent  indorsements,  and  re-issue  the  instrument. 

(a)     Cases,  pp.  599-600.  |      {/>)     Cases,  pp.  600-602.    See  §55  [29], 

§  203.  Renunciation  by  holder.  [§  122] 

The  holder  may  expressly  renounce  his  rights  against  any 
party  to  the  instrument,  before,  at  or  after  its  maturity. 
An  absolute  and  unconditional  renunciation  of  his  rights 
against  the  principal  debtor  made  at  or  after  the  maturity  of 
the  instrument,  discharges  the  instrument.  But  a  renuncia- 
tion does  not  affect  the  rights  of  a  holder  in  due  course  with- 
out notice.  A  renunciation  must  be  in  writing,  unless  the 
instrument  is  delivered  up  to  the  person  primarily  liable 
thereon,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  62;  Byles  on  Bills,  igo,  191; 
Daniel  on  Neg.  Inst.,  sections  541-545.  The  Bills  of  Exchange  Act  requires 
the  renunciation  to  be  "  in  writing,  unless  the  bill  is  delivered  to  the  acceptor." 
But  this  effected  a  change  in  the  law.]  "  The  words  requiring  the  renuncia- 
tion to  be  in  writing  were  added  in  committee.  They  alter  the  English  law,  but 
bring  it  into  accordance  with  the  Scotch  law.  At  common  law  a  contract  cannot 
be  discharged  by  accord  without  satisfaction.  The  special  rule  as  to  bills  and 
notes  partially  reproduced  in  this  section  seems  to  have  been  consciously 
imported  into  the  law  merchant  from  French  law.  (See  Parke,  B.,  in  Foster  v. 
Dawber,  6  Exch.,  at  p.  852.)  This  mode  of  discharge  is  known  in  France  as 
'  remise  voluntaire,'  and  is  recognized  in  countries  where  the  civil  law  is  fol- 
lowed. (See  Nouguier,  §§  1043-1052.)  "  Chalmers,  Bills  of  Exchange  Act  (5th 
ed.),  p.  212. 

(a)     Cases,  pp.  579-5S1. 

§  204.  Cancellation  ;  unintentional ;  burden  of  proof.      [§  123] 

A  cancellation  made  unintentionally,  or  under  a  mistake, 
or  without  the  authority  of  the  holder,  is  inoperative;  but 
where  an  instrument  or  any  signature  thereon  appears  to  have 
been  canceled  the  burden  of  proof  lies  on  the  party  who 
alleges  that  the  cancellation  was  made  unintentionally,  or 
under  a  mistake  or  without  authority,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  63  subdivision  (3).]  Chalmer 
cites:  Raper  v.  Birkbeck,  15  East,  17;  Wilkinson  v.  Johnson,  3  B.  &  C.  428; 
Novell!  V.  Rossi,  2  B.  &  Ad.  757;  Castrique  v.  Imrie,  L.  R.  4  H.  L.  435;  War- 
wick V.  Rogers,  5  M.  &  Gr.  340  and  373;  Prince  v.  Oriental  Bank,  L.  R.  3  App. 
Gas.  325;   Dominion  Bank  v.  Anderson,  15  Sess.  Cas   408. 

(a)     Cases,  pp.  582-585. 


DISCHARGE   OF   NEGOTIABLE   INSTRUMENTS.  5/ 

§  205.  Alteration  of  instrument ;  effect  of.  [§  124J 

Where  a  negotiable  instrument  is  materially  altered  with- 
out the  assent  of  all  parties  liable  thereon,  it  is  avoided, 
except  as  against  a  party  who  has  himself  made,  authorized 
or  assented  to  the  alteration  and  subsequent  indorsers.  {a) 
But  when  an  instrument  has  been  materially  altered  and  is 
in  the  hands  of  a  holder  in  due  course,  not  a  party  to  the 
alteration,  he  may  enforce  payment  thereof  according  to  its 
original  tenor,  {b) 

[Note.  —  See  Bills  of  Exchange  Act,  section  64,  subdivision  (i);  Daniel  on 
Neg.  Inst.,  sections  I3g3-i42ia. 

The  Bills  of  Exchange  Act  contains  a  provision  that  "  where  a  bill  has  been 
materially  altered,  but  the  alteration  is  not  apparent,  and  the  bill  is  in  the  hands 
of  a  holder  in  due  course,  such  holder  may  avail  himself  of  the  bill  as  if  it  had 
not  been  altered,  and  may  enforce  payment  of  it  according  to  its  original 
tenor."  But  this  effects  a  change  in  the  law.]  This  change  was  subsequently 
adopted  by  the  Commissioners  on  Uniformity  of  Laws,  and  is  introduced  in 
substance  above. 


{a)     Cases,  pp.  585-592. 

{b)  Cases,  p.  587  n.  "  The  pro-viso 
was  introduced  in  committee  to  miti- 
gate the  rigor  of  the  common-law 
rule  in  favor  of  a  holder  in  due  course. 
*  *  *  At  common  law  a  material  al- 
teration, by  whomsoever  made  (David- 
son V.  Cooper,  11  M.  &  W.  at  p.  799; 
aff'd  13  M.  &  W.  343),  avoided  and 
discharged  the  bill,  except  as  against  a 
party  who  made  or  assented  to  the 
alteration.  (Hamelin  v.  Bruck,  9  Q.  B. 
306.)  Thus  where  a  bill  was  altered 
by  adding  a  place  of  payment  without 
the  acceptor's  consent,  and  was  subse- 


quently indorsed  to  a  holder  in  due 
course,  it  was  laid  down  that  the  holder 
could  not  sue  the  indorser  on  the  bill, 
for  the  instrument  was  discharged. 
(Burchfield  v.  Moore,  23  L.  J.  Q.  B. 
261.)  He  could  only  sue  on  the  con- 
sideration.  In  America  the  rule  is  not 
quite  so  severe,  and  it  is  held  that  an 
alteration  by  a  stranger,  or,  as  it  is 
called,  '  an  act  of  spoliation,'  does  not 
avoid  a  bill.  (Parsons  on  Bills,  vol. 
II.,  p.  574;  cf.  U.  S.  v.  Spalding,  2 
Mason,  482;  Dinsmore  v.  Duncan,  57 
N.  Y.  581.)"  Chalmers,  Bills  of  E.x- 
change  Act  (5th  ed.),  p.  214. 


§  206.  What  constitutes  a  material  alteration.  [§  125] 

Any  alteration  which  changes : 

1.  The  date;(^) 

2.  The  sum  payable,  either  for  principal  {b)  or  inter- 
est ;  (r) 

3.  The  time  (d)  or  place  {e)  of  payment ; 

4.  The  number  or  the  relations  of  the  parties;  (/) 

5.  The  medium  or  currency  in  which  payment  is  to  be 
made;(^) 

Or  which  adds  a  place  of  payment  where  no  place  of 
payment  is  specified  {h),  or  any  other  change  or  addition 


58 


THE   NEGOTIABLE    INSTRUMENTS   LAW. 


which  alters  the  effect  of 
is  a  material  alteration.  {{) 

[Note.  —  See  Bills  of  Exchange  Act, 

(a)  [See  Wood  v.  Steele,  6  Wallace, 
80;  Crawford  v.  West  Side  Bank,  100 
N.  Y.  50,  56;  Daniel  on  Neg.  Inst.,  sec- 
tion 1376.]     See  §  32  [13],  aiitt'. 

(/')  [See  Daniel  on  Neg.  Inst.,  sec- 
tion 1384.] 

(i)  [Daniel  on  Neg.  Inst.,  section 
1385,  and  cases  there  cited.] 

(a)  [Weyman  v.  Yeomans,  84  111. 
403;  Miller  v.  Gilleland,  19  Pa.  St. 
119.] 

(e)  [Tidmarsh  v.  Grover,  i  Maule  & 
S.  735;  Bank  of  Ohio  Valley  v.  Lock- 
wood,  13  W.  Va.  392.] 

(/)  [Daniel  on  Neg.  Inst.,  sections 
1387-1390.] 

(^)  [Angle  V.  Insurance  Company, 
92  U.  S.  330;  Church  v.  Howard,  17 
Hun,  5;  Darwin  v.  Rippey,  63  N.  C. 
318;  Bagarth  v.  Breedlove,  39  Tex. 
561.] 

(//)  [Whitesides  v.  Northern  Bank, 
10  Bush,  501.] 

(i)  Distinguish  authorized  filling  of 
blanks:  §  33  [14],  t7"ti'. 

"An  alteration  is  material  which  in 
any  way  alters  the  operation  of  the  bill 
and  the  liabilities  of  the  parties, 
whether  the  change  be  prejudicial  or 
beneficial  (Gardner  v.  Walsh,  5  E.  &  B. 
83,  at  p.  89);  and  it  may  be  that  even 
this  test  is  not  wide  enough.  'Any 
alteration,'  says  Brett,  L.  J.,  '  seems  to 
me  material  which  would  alter  the 
business  effect  of  the  instrument,  if 
used  for  any  business  purpose.' 
(Suffell  V.  Bank  of  England,  9  Q.  B.  D. 
555,  at  p.  568;  see  the  test  suggested 


the  instrument  in  any  respect, 

section  64.]     Cases,  pp.  585-592. 

by  Cotton.  L.  J.,  at  pp.  574,  575-)  The 
materiality  of  an  alteration  is  a  ques- 
tion of  law.     (Vance  v.  Lowther,  i  Ex, 

D.  176.) 
Subject  to  two  exceptions  the  holder 

of  a  bill,  which  has  been  avoided  by  a 
material  alteration,  cannot  sue  on  the 
consideration  in  respect  of  which  it  was 
negotiated  to  him.  (Alderson  v.  Lang- 
dale,  3  B.  &  Ad.  660.)  Exception  i.  If 
the  bill  was  negotiated  to  him  after  the 
alteration  was  made,  and  he  was  not 
privy  to  the  alteration,  he  may  sue  on 
the  consideration.  (Burchfield  v.  Moore, 
23  L.  T-  Q-  B.  261;  cf.  Cundy  v.  Marri- 
ott, I  B.  &  Ad.  696.)  Exception  2.  If 
the  bill  was  altered  while  in  his  custody 
or  under  his  control,  he  can  still  recover, 
provided  {a)  that  he  did  not  intend  to 
commit  a  fraud  by  the  alteration  (Par- 
sons, vol.  II.,  p.  572;  Hunt  V.  Gray,  35 
N.  J.  L.  227),  and  (l>),  that  the  party 
sued  would  not  have  had  any  remedy 
over  on  the  bill,  if  it  had  not  been 
altered.     (Atkinson  v.  Hawdon,  2  A.  & 

E.  628;  cf.  Sutton  v.  Toomer,  7  B.  &  C. 
416;  Alderson  v.  Langdale,  3  B.  &  Ad. 
660.) 

When  a  bill  appears  to  have  been 
altered,  or  there  are  marks  of  erasures 
on  it,  the  party  seeking  to  enforce  the 
instrument  is  bound  to  give  evidence 
to  show  that  it  is  not  avoided  thereby. 
(Knight  V.  Clements,  8  A.  &  E.  215; 
Clifford  V.  Parker,  2  M.  &  Gr.  909.)" 
Chalmers,  Bills  of  Exchange  Act  (5th 
ed.),  pp.   217-218. 


ARTICLE  X. 

BILLS  OF  EXCHANGE;  FORM  AND  INTERPRETATION. 

Section  210.   Bill  of  exchange  defined. 

211.   Bill  not  an  assignment  of  funds  in  hands  of  drawee. 


*§  [126]  to  §  [131]  in  the  other  States. 


BILLS   OF    EXCHANGE  ;    FORM    AND    INTERPRETATION.        59 

Section  212.  Bill  addressed  to  more  than  one  drawee. 

213.  Inland  and  foreign  bills  of  exchange. 

214.  When  bill  may  be  treated  as  promissory  note. 

215.  Drawee  in  case  of  need. 

§  210.  Bill  of  exchange  defined.  [§  126] 

A  bill  of  exchange  is  an  unconditional  order  in  writing 
addressed  by  one  person  to  another,  signed  by  the  person 
giving  it,  requiring  the  person  to  whom  it  is  addressed  to 
pay  on  demand  or  at  a  fixed  [or]  *  determinable  future  time  a 
sum  certain  in  money  to  order  or  to  bearer. 

[Note.  — See  section  i  (N.  Y.  20);  Bills  of  Exchange  Act,  section  3.] 
"A  bill  is  sometimes  called  a  draft,  and  an  accepted  bill  is  often  referred  to 
as  '  an  acceptance.'  The  person  who  gives  the  order  is  called  the  drawer.  The 
person  thereby  ordered  to  pay  is  called  the  drawee,  and  if  he  signifies  his  assent 
to  the  order  in  due  form  [see  §  220  (132), /t'^/],  he  is  then  called  the  acceptor. 
The  person  to  whom  the  money  is  payable  is  called  the  payee  or  bearer,  as  the 
case  may  be.  [See  §  2  (General  Provisions),  ante.]  The  foreign  codes  for 
the  most  part  provide  in  terms  that  a  bill  may  be  drawn  by  one  person  for  the 
account  of  another.  The  person  for  whose  account  the  bill  is  drawn  is  spoken 
of  in  England  as  the  '  third  account.'  For  example,  a  merchant  in  America 
may  direct  his  agent  in  England  to  draw  on  a  correspondent  in  Paris  for  his 
(the  principal's)  account."     Chalmers,  Bills  of  Exchange  Act  (5th  ed.),  p.  8. 

§  211.  Bill  not  an  assignment  of  funds  in  hands  of  drawee. 

[§  127] 

A  bill  of  itself  does  not  operate  as  an  assignment  of  the 

funds  in  the  hands  of  the  drawee  available  for  the  payment 

thereof,  and  the  drawee  is  not  liable  on  the  bill  unless  and 

until  he  accepts  the  same,  (a) 

[Note.  — See  Bills  of  Exchange  Act,  section  53.] 
(a)     Cases,  pp.  605-607 

§  212.  Bill  addressed  to  more  than  one  drawee.  [§  128] 

A  bill  may  be  addressed  to  two  or  more  drawees  jointly, 
whether  they  are  partners  or  not ;  but  not  to  two  or  more 
drawees  in  the  alternative  or  in  succession,  (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  6.  subdivision  (2).]  See  §  229 
(5),  [141], /^j/,  and  §  242  (i)  [14s], />ost. 


(a)  Cases,  pp.  603-604.  "Though  a  bill 
may  not  be  addressed  to  two  drawees 
in  succession,  or  in  the  alternative,  it 
may  name  a  drawee   in   case   of   need 


[§  215  (131),  J>osi];  but  his  status  is 
wholly  different  from  that  of  an  ordi- 
nary drawee.  Alternative  or  successive 
drawees  would  give  rise  to  difficulty  as 


Omitted  by  mistake  in  N.  Y.  Act. —  Ed. 


6o 


THE   NEGOTIABLE    INSTRUMENTS    LAW. 


to  the  recourse  if  the  bill  was  dishon- 
ored. The  difficulty  does  not  arise  in 
the  case  of  a  note,  consequently  the 
makers  of  a  note  may  be  liable  jointly, 
or  jointly  and  severally,  according  to 
its  tenor,  while    the  acceptors  of  a  bill 


can  only  be  liable  jointly.  A  note  pay- 
able in  the  alternative  by  one  of  two 
makers  is  invalid.  (Ferris  v.  Bond,  4 
B.  &  Aid.  679.)"  Chalmers,  Bills  of 
Exchange  Act  (5th  ed.),  p.  19. 


§  213.   Inland  and  foreign  bills  of  exchange.  [§  129] 

An  inland  bill  of  exchange  is  a  bill  which  is,  or  on  its  face 
purports  to  be,  both  drawn  and  payable  within  this  state. 
Any  other  bill  is  a  foreign  bill,  (a)  Unless  the  contrary 
appears  on  the  face  of  the  bill,  the  holder  may  treat  it  as  an 
inland  bill. 

[Note.  —  See  Bills  of  Exchange  Act,  section  4,  subdivision  (i);  Buckner  v. 
Finley,  2  Peters,  586;  Strawbridge  v.  Robinson,  5  Oilman,  470.] 

(a)     Cases,  p.  608. 

§  214.  When  bill  may  be  treated  as  promissory  note.      [§  130] 

Where  in  a  bill  drawer  and  drawee  are  the  same  person,  or 
where  the  drawee  is  a  fictitious  person,  or  a  person  not  having 
capacity  to  contract,  the  holder  may  treat  the  instrument,  at 
his  option,  either  as  a  bill  of  exchange  or  a  promissory  note. 

[Note.  —  See  Bills  of  Exchange  Act,  section  5,  subdivision  (2).]  See  §  36 
(5)  [17])  '^«'^-  "  If  both  drawer  and  drawee  are  fictitious  persons  the  bill  might, 
perhaps,  be  treated  as  a  note  made  by  the  first  indorser."     Chalmers,  p.    iS. 

Cases,  p.  60Q. 


§  215.  Referee  in  case  of  need.  [§  131] 

The  drawer  of  a  bill  and  any  indorser  may  insert  thereon 
the  name  of  a  person  to  whom  the  holder  may  resort  in  case 
of  need,  that  is  to  say,  in  case  the  bill  is  dishonored  by  non- 
acceptance  or  non-payment.  Such  person  is  called  the  referee 
in  case  of  need.  It  is  in  the  option  of  the  holder  to  resort  to 
the  referee  in  case  of  need  or  not  as  he  may  see  fit. 

[Note.  — See  bills  of  Exchange  Act,  section  15;  Daniel  on  Neg.  Inst.,  sections 
III,  529.]      Cases,  p.  605. 

"The  referee  in  case  of  need  is  sometimes  called  the  drawee  in  case  of  need, 
or  simply  the  '  case  of  need.'  A  bill  must  be  protested  or  noted  for  protest  before 
it  can  be  presented  to  the  case  of  need.  [See  g|  280  (161),  286  (167),  posf.]  The 
concluding  words  of  the  section  settle  the  moot  point,  whether  presentment  to 
the  case  of  need  is  obligatory  or  optional." — Chalmers,  p.  38. 


ACCEPTANCE   OF   BILLS   OF   EXCHANGE. 


6i 


ARTICLE  XI. 

ACCEPTANCE  OF  BILLS  OF  EXCHANGE. 

*  Section  220.  Acceptance,  how  made,  et  cetera. 

221.  Holder  entitled  to  acceptance  on  face  of  bill. 

222.  Acceptance  by  separate  instrument. 

223.  Promise  to  accept;  when  equivalent  to  acceptance. 

224.  Time  allowed  drawee  to  accept. 

225.  Liability  of  drawee  retaining  or  destroying  bill. 

226.  Acceptance  of  incomplete  bill. 

227.  Kinds  of  acceptances. 

228.  What  constitutes  a  general  acceptance. 

229.  Qualified  acceptance. 

230.  Rights  of  parties  as  to  qualified  acceptance. 

§  220.  Acceptance  ;  how  made,  et  cetera.  [§  132] 

The  acceptance  (rt:)  of  a  bill  is  the  signification  by  the 
drawee  of  his  assent  to  the  order  of  the  drawer.  The 
acceptance  must  be  in  writing  and  signed  by  thedrawee.f  (<^) 
It  must  not  express  that  the  drawee  will  perform  his  promise 
by  any  other  means  than  the  payment  of  money.  (<r) 


ance  be  written  on  the  bill.  The  Ameri- 
can statutes  do  not  generally  require 
this.]     See  next  two  sections. 

(r)  [See  Bills  of  Exchange  Act,  sec- 
tion 17,  subdivision  (2)  {/>).]  See  §  20 
[l],  anfe. 


{a)  See  |  2  [General  Provisions],  anie. 

{b)  Cases,  pp.  610-613.  [See  Bills  of 
Exchange  Act,  section  17;  i  N.  Y.  Rev. 
Stat.,  768,  §  6.  The  Bills  of  Exchange 
Act,  following  previous  English  stat- 
utes (i  &  2  George  IV.,  c.  78;  19  &  20 
Victoria,  c.  78)  requires  that  theaccept- 

§  221.  Holder  entitled  to  acceptance  on  face  of  bill.         [§  133] 

The  holder  of  a  bill  presenting  the  same  for  acceptance 
may  require  that  the  acceptance  be  written  on  the  bill,  and  if 
such  request  is  refused,  may  treat  the  bill  as  dishonored. 

[Note.  —  i  N.  Y.  Rev.  Stat.,  76S,  section  9.]  The  English  Act  requires  that 
the  acceptance  be  written  on  the  bill;  the  American  Act  leaves  it  optional  with 
the  holder  to  require  it,  or  to  waive  it.  This  permits  acceptances  by  telegraph. 
Garretson  v.  North  Atchison  Bank,  39  Fed.  Rep.  113,  47  Fed.  Rep.  867,  51  Fed. 
Rep.  168. 

§  222.  Acceptance  by  separate  instrument.  [§  134] 

Where  an  acceptance  is  written  on  a  paper  other  than  the 
bill  itself,  it  does  not  bind  the  acceptor  except  in  favor  of  a 


*§  [132]  to  §  [142]  in  the  other  States. 

f  "  Drawer"  appears  by  mistake  in  N.  Y.  Act  — Ed. 


62 


THE   NEGOTIABLE   INSTRUMENTS    LAW„ 


person  to  whom  it  is  shown  and  who,  on  the  faith  thereof, 
receives  the  bill  for  value,  {a) 

[Note.  —  i  N.  Y.  Rev.  Stat.  768,  section  7.] 
(a)     Cases,  pp.  613-616. 

§  223.  Promise  to  accept ;  when  equivalent  to  acceptance. 

I  §135] 

An  unconditional  promise  in  writing  to  accept  a  bill  before 

it  is  drawn  is  deemed  an  actual  acceptance  in  favor  of  every 

person  who,    upon  the   faith   thereof,   receives  the  bill  for 

value,  (a) 

[Note.  —  i  N.  Y.  Rev.  Stat.  76S,  section  8.] 
(a)     Cases,  pp.  613-616. 

§  224.  Time  allowed  drawee  to  accept.  [§  136] 

The  drawee  is  allowed  twenty-four  hours  after  present- 
ment in  which  to  decide  whether  or  not  he  will  accept  the 
bill  (a) ;  but  the  acceptance  if  given  dates  as  of  the  day  of 
presentation.  {I?) 


(a)  [See  Byles  on  Bills,  1S2;  Daniel 
on  Neg.  Inst.,  section  492.  By  statute 
in  Massachusetts,  the  drawee  has  until 
two  o'clock  on  the  day  following. 
Public  Statutes,  1882,  ch.  77,  sec.  17.] 


(^)  [There  does  not  appear  to  be  any 
direct  authority  on  this  point;  the  rule 
stated  conforms  to  what  is  the  common 
practice.  See  also  statute  of  Massa- 
chusetts above  referred  to.] 


§  225.   Liability  of  drawee  retaining  or  destroying  bill.   [§  137] 

Where  a  drawee  to  whom  a  bill  is  delivered  for  acceptance 
destroys  the  same,  or  refuses  within  twenty-four  hours  after 
such  delivery,  or  within  such  other  period  as  the  holder  may 
allow,  to  return  the  bill  accepted  or  non-accepted  to  the 
holder,  he  will  be  deemed  to  have  accepted  the  same,  (a) 

[Note.  —  i  N.  Y.  Rev.  Stat.  769,  section  11 ;  see  Daniel  on  Neg.  Inst.,  sec- 
tion 500.] 

(a)     Cases,  pp.  617-619. 

§  226.  Acceptance  of  incomplete  bill.  [§  138] 

A  bill  may  be  accepted  before  it  has  been  signed  by  the 
drawer,  or  while  otherwise  incomplete  {a),  or  when  it  is 
overdue,  or  after  it  has  been  dishonored  by  a  previous 
refusal  to  accept,  or  by  non-payment,  {d)     But  when  a  bill 


ACCEPTANCE   OF   BILLS   OF   EXCHANGE. 


63 


payable  after  sight  is  dishonored  by  non-acceptance  and  the 
drawee  subsequently  accepts  it,  the  holder,  in  the  absence  of 
any  different  agreement,  is  entitled  to  have  the  bill  accepted 
as  of  the  date  of  the  first  presentment,  {c) 


[Note.  —  See   Bills  of  Exchange  Act, 
tions  490-495.] 

(a)  Cases,  pp.  619-620.  See  §  33 
[14],  anie. 

(/>)  Cases,  pp.  620-621.  Chalmers 
cites  Mutford  v.  Walcot,  i  Ld.  Raym. 
5';4;  Wynne  v.  Raikes,  5  East.  514- 

(t)  "  This  subsection  was  added  in 
committee.  It  accords  with  mercantile 
practice,  and  was  intended  to  secure 
that,  apart  from  special  agreement,  the 
holder  should   be   put,  as  far  as   possi- 


section   18;  Daniel  on  Neg.  Inst.,  sec- 

ble,  in  the  same  position  as  if  the  bill 
had  not  been  dishonored.  Unless  the 
contrary  appear  by  its  terms,  a  bill  of 
exchange  is  prima  facte  deemed  to  have 
been  accepted  before  maturity  and 
within  a  reasonable  time  after  its  issue, 
but  there  is  no  presumption  as  to  the 
exact  time  of  acceptance.  (Roberts  v. 
Bethell,  12C.  B.  778.)"  Chalmers' Bills 
of  Exchange  Act  (5th  ed.).  p.  45. 


§  227.  Kinds  of  acceptances.  [§  139] 

An  acceptance  is  either  general  or  qualified.  A  general 
acceptance  assents  without  qualification  to  the  order  of  the 
drawer,  (a)  A  qualified  acceptance  in  express  terms  varies 
the  effect  of  the  bill  as  drawn,  {i?) 

[Note. —See  Bills  of  Exchange  Act,  secf'on  19;  Byles  on  Bills,  193;  Daniel 
on  Neg.  Inst.,  section  509  et  seq.] 

of  the  acceptance.  (Fanshawe  v.  Peet, 
26  L.  J.  Ex.  314;  cf.  Stone  v.  Metcalfe, 
4 Camp.  217;  Fitch  V.  Jones,  5  E.  &B.,  at 
p.  246;  Decroix  v.  Meyer,  25  Q.  B.  D. 
343.)  "  Chalmers,  p.  46. 
(d)     See  §  229  [141].  /^-f^- 


{a)  Cases,  pp.  621-625.  "An  accept- 
ance is,  whenever  possible,  to  be  con- 
strued as  general,  not  qualified;  and  a 
mere  memorandum,  such  as  a  wrong  due 
date,  inconsistent  with  such  construc- 
tion, has  been  rejected  as  being  no  part 


§  228.  What  constitutes  a  general  acceptance.  [§  140] 

An  acceptance  to  pay  at  a  particular  place  is  a  general 
acceptance  unless  it  expressly  states  that  the  bill  is  to  be  paid 
there  only  and  not  elsewhere,  {a) 

[Note. —See  Bills  of  Exchange  Act,  section  19,  subdivision  (2);  Wallace  v. 
McConnell,  13  Peters,  136;  Daniel  on  Neg.  Inst.,  sections  519-520,  641-643.] 


{a)  Cases,  pp.  625-626.  "  This  sub- 
section reproduces  the  effect  of  the  re- 
pealed I  &  2  Geo.  4,  c.  78,  which  was 
passed  to  override  the  case  of  Rowe  v. 
Young,    2   Brod.    &   Bing.    165;    s.  c.   2 


Btigh.  H.  L.  391,  where  it  was  held 
that  an  ordinary  acceptance  payable  at 
a  banker's  was  a  qualified  acceptance." 
Chalmers,  Bills  of  Exchange  Act  (5th 
ed.),  p.  48. 


64  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

§  229.  Qualified  acceptance.  [§  141J 

An  acceptance  is  qualified,  which  is : 

1.  Conditional,  that  is  to  say,  which  makes  payment  by 
the  acceptor  dependent  on  the  fulfillment  of  a  condition 
therein  stated ;  {a) 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part 
only  of  the  amount  for  which  the  bill  is  drawn ;  (/y) 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a 
particular  place ;  {c) 

4.  Qualified  as  to  time ;  {d) 

5.  The  acceptance  of  some  one  or  more  of  the  drawees, 
but  not  of  all.  (e) 

[Note. — See    Bills  of   Exchange   Act,  section    19,  subdivision   (2);    Byles  on 
Bills,  193-194;  Daniel  on  Keg.  Inst.,  sections  508-520.] 


(a)     Cases,  pp.  626-628. 
(i)     Cases,  p.  628. 

(c)  Cases,   pp.    628-629.     See    §    228 
[140],  anie. 

(d)  Cases,  p.  629. 

(e)  Cases,  p.  630.     "  Bill  drawn   on 


B,  XandY.  B  accepts,  X  and  Y  refuse 
to  accept.  This  is  a  qualified  accept- 
ance." Chalmers  (p.  48),  citing  Marius, 
No.  16;  New  York  Draft  Code,  §  1784I 
Nouguier,  §  451. 


§  230.  Rights  of  parties  as  to  qualified  acceptance.         [§  142J 

The  holder  may  refuse  to  take  a  qualified  acceptance,  and 
if  he  does  not  obtain  an  unqualified  acceptance,  he  may  treat 
the  bill  as  dishonored  by  non-acceptance,  {a)  Where  a  quali- 
fied acceptance  is  taken,  the  drawer  and  indorsers  are  dis- 
charged from  liability  on  the  bill,  unless  they  have  expressly 
or  impliedly  authorized  the  holder  to  take  a  qualified  accept- 
ance, or  subsequently  assent  thereto.  (/;)  When  the  drawer 
or  an  indorse r  receives  notice  of  a  qualified  acceptance,  he 
must  within  a  reasonable  time  express  his  dissent  to  the 
holder,  or  he  will  be  deemed  to  have  assented  thereto,  (c) 

[Note. —See  Bills  of  Exchange  Act,  section  44;  Byles  on  Bills,  192-193; 
Daniel  on  Neg.  Inst.,  sections  508,  510. 

The  Bills  of  Exchange  Act  provides  that  the  provisions  relative  to  the  assent 
of  the  drawer  and  indorser  do  not  apply  "  to  partial  acceptance  whereof  due 
notice  has  been  given,"  and  that  "  where  a  foreign  bill  has  been  accepted  as  to 
part,  it  must  be  protested  as  to  the  balance."  But  there  appears  to  be  some 
doubt  whether  this  correctly  states  the  rule  of  the  law  merchant.  See  Daniel 
on  Neg.  Inst.,  section  511;  Story  on  Bills,  section  272.] 

(a)  Cases,  p.  630.  "According  to  I  the  holder  cannot  refuse  a  partial  ac- 
the    continental    codes,    it    seems    that  |  ceptance.     He   can   only   protest  as   to 


PRESENTMENT  OF  BILLS  OF  EXCHANGE  FOR  ACCEPTANCE.      65 


the  balance.     (French  Code,  arts.  119- |      (c)    "  This  sub-section  settles  a  doubt- 


120;  German  Exchange  Law,  arts.  25- 
2S.)  "     Chalmers,  p.  140. 
(d)     Cases,  p.  631. 


ful  point  in  favor  of  the  holder.  See 
subject  discussed  in  Rowe  v.  Young,  2 
Bligh.  391."     Chalmers,  p.  141. 


ARTICLE  XII. 

PRESENTMENT  OF  BILLS  OF  EXCHANGE  FOR  ACCEPTANCE. 

*  Section  240.  When  presentment  for  acceptance  must  be  made. 

241.  When  failure  to  present  releases  drawer  and  indorser. 

242.  Presentment;  how  made. 

243.  On  what  days  presentment  may  be  made. 

244.  Presentment;  where  time  is  insufficient. 

245.  When  presentment  is  excused. 

246.  When  dishonored  by  non-acceptance. 

247.  Duty  of  holder  where  bill  not  accepted. 

248.  Rights  of  holder  where  bill  not  accepted. 

8  24.0.  When  presentment  for  acceptance  must  be  made. 

[§143] 
Presentment  for  acceptance  must  be  made : 

.  I.  Where  the  bill  is  payable  after  sight,  or  in  any  other 
case  where  presentment  for  acceptance  is  necessary  in 
order  to  fix  the  maturity  of  the  instrument ;  (a)  or 

2.  Where  the  bill  expressly  stipulates  that  it  shall  be 
presented  for  acceptance ;  (^)  or 

3.  Where  the  bill  is  drawn  payable  elsewhere  than  at 
the  residence  or  place  of  business  of  the  drawee,  (c) 

In  no  other  case  is  presentment  for  acceptance  necessary 
in  order  to  render  any  party  to  the  bill  liable,  {d) 

(a)  [See  Bills  of  Exchange  Act,  sec- 
tion 39,  subdivision  (i);  Daniel  on  Neg. 
Inst.,  section  454.] 

(i>)  [See  Bills  of  Exchange  Act,  sec- 
tion 39,  subdivision  (2).] 

{c)     [/^.]     See  §  244  [147].  P^^^- 

(d)  Cases,  pp.  632-636.  "  Where 
presentment  is  optional,  the  object  of 
presenting  is  (i),  to  obtain  the  accept- 
ance of  the  drawee,  and  thereby  secure 
his  liability  as  a  party  to  the  bill;  (2), 
to  obtain  an  immediate  right  of  recourse 
against  antecedent  parties  in  case  the 


bill  is  dishonored  by  non-acceptance. 
An  agent  is  bound  to  use  due  diligence 
in  presenting  for  acceptance,  even 
when  presentment  is  optional  for  the 
purposes  of  the  Act,  and  he  is  liable  to 
his  principal  for  damages  resulting 
from  his  negligence.  (Pothier,  No. 
128;  Nouguier,  ^  462;  Allen  v.  Suy- 
dam,  20  Wend.  321;  Bank  of  Van  Die- 
men's  Land  v.  Victoria  Bank,  L.  R.  3 
P.  C.  at  p.  542.)  "  Chalmers,  Bills  of 
Exchange  Act  (5th  ed.),  p.  132. 


*  g  [143]  to  §  [151]  in  the  other  States. 

NEGOT.   INSTRUMENTS  —  5 


(^ 


THE   NEGOTIABLE   INSTRUMENTS   LAW. 


§  241.  When  failure  to  present  releases  drawer  and  indorser. 

[§  144I 
Except  as  herein  otherwise  provided,  the  holder  of  a  bill 
which  is  required  by  the  next  preceding  section  to  be  pre- 
sented for  acceptance  must  either  present  it  for  acceptance 
or  negotiate  it  within  a  reasonable  time,  {a)  If  he  fails  to  do 
so,  the  drawer  and  all  indorsers  are  discharged,  ij)) 

[Note. — See  Bills  of   Exchange  Act,  section   40,  subdivision  (i);  Wallace  v. 
Agry,  4  Mason,  333;   Daniel  on  Neg.  Inst.,  sections  469-472.] 

(a)     See    §    4    [General    Provisions],  I      {b)     Cases,  pp.  633-636. 
ante.  I 


§  242.  Presentment ;  how  made.  [§  145] 

Presentment  for  acceptance  must  be  made  by  or  on  behalf 
of  the  holder  at  a  reasonable  hour  (a),  on  a  business  day,  and 
before  the  bill  is  overdue  {U),  to  the  drawee*  or  some  person 
authorized  to  accept  or  refuse  acceptance  on  his  behalf  \c) ;  and 

1.  Where  a  bill  is  addressed  to  two  or  more  drawees 
who  are  not  partners,  presentment  must  be  made  to  them 
all,  unless  one  has  authority  to  accept  or  refuse  accept- 
ance for  all,  in  which  case  presentment  may  be  made  to 
him  only ;  {d) 

2.  Where  the  drawee  is  dead,  presentment  may  be 
made  to  his  personal  representative ;  {e) 

3.  Where  the  drawee  has  been  adjudged  a  bankrupt  or 
an  insolvent,  or  has  made  an  assignment  for  the  benefit 
of  creditors,  presentment  may  be  made  to  him  or  to  his 
trustee  or  assignee.  (/) 


[Note.  —  See  Bills  of  Exchange  Act, 

{a)  See  ^  132  (2)  [72],  ante  [See 
Daniel  on  Neg.  Inst.,  section  464a.] 

(b)  See  Plato  v.  Reynolds,  27  N.  Y. 
586.     Cases,  p.  632. 

(c)  Cases,  pp.  637-640.  [Byles  on 
Bills,  182;  Daniel  jan  Neg.  Inst.,  sec- 
tion 487.] 

{d)  [Daniel  on  Neg.  Inst.,  section 
488].     Ante,  %  229  (5)  [141]- 

{e)  [Daniel  on  Neg.  Inst.,  section 
591.]  "  Before  this  enactment  the  law 
on    this     point     was     very     doubtful. 


section  41,  subdivision  (i).] 

Smith  V.  New  South  Wales  Bank,  8 
Moore,  P.  C.  N.  S.,  at  pp.  461,  462. 
Now  the  holder  has  an  option."  (See 
§  245  (i)  [i4S],/<?j-/.)  Chalmers,  p.  I36n. 
(/)  [The  Bills  of  Exchange  Act  pro- 
vides that,  "  Where  authorized  by 
agreement  or  usage  a  presentment 
through  the  post  office  is  sufficient." 
But  probably  no  such  practice  prevails 
in  this  country,  nor  does  it  appear  to 
be  a  practice  that  should  be  encour- 
aged.] 


Drawer  "  appears  by  mistake  in  N.  Y.  Act.  —  Ed. 


PRESENTMENT  OF  BILLS  OF  EXCHANGE  FOR  ACCEPTANCE.      6"] 

§  243.  On  what  days  presentment  may  be  made.  [§  146] 

A  bill  may  be  presented  for  acceptance  on  any  day  on 
which  negotiable  instruments  may  be  presented  for  payment 
under  the  provisions  of  sections  seventy-two*  and  eighty-five* 
of  this  act.  When  Saturday  is  not  otherwise  a  holiday,  pre- 
sentment for  acceptance  may  be  made  before  twelve  o'clock 
noon  on  that  day. 

§  244.  Presentment  where  time  is  insufficient  [§  147] 

Where  the  holder  of  a  bill  drawn  payable  elsewhere  than 
at  the  place  of  business  or  the  residence  of  the  drawee  has  not 
time  with  the  exercise  of  reasonable  diligence  to  present  the 
bill  for  acceptance  before  presenting  it  for  payment  on  the 
day  that  it  falls  due,  the  delay  caused  by  presenting  the  bill 
for  acceptance  before  presenting  it  for  payment  is  excused 
and  does  not  discharge  the  drawers  and  indorsers. 

[Note.  —  See  Bills  of  Exchange  Act,  section  39,  subdivision  (4).] 
This  section  is  rendered  necessary  by  §  240  [147],  subsec.  3.  ante.  "  It  settles 
a  moot  point,  and  perhaps  alters  the  law.  Suppose  a  bill,  payable  one  month 
after  date,  is  drawn  in  New  York  on  a  Liverpool  firm,  but  payable  at  a  London 
bank.  It  only  reaches  the  English  holder,  or  his  agent,  on  the  day  that  it  ma- 
tures. He  must,  nevertheless,  present  it  for  acceptance  to  the  drawees  in  Liver- 
pool. The  Act  provides  that  he  shall  not  be  prejudiced  by  so  doing.  Before  the 
Act  the  usual  practice  was  to  protest  the  bill  in  London  without  any  presentment 
to  the  drawees  —  an  obviously  inconvenient  mode  of  proceeding,  for  the  holder's 
object  is  to  get  the  bill  paid,  and  not  to  run  up  expenses  pgainstthe  drawer  and 
indorsers."     Chalmers,  p.  133. 

§  245.  Where  presentment  is  excused.  [§  148] 

Presentment  for  acceptance  is  excused  and  a  bill  may  be 
treated  as  dishonored  by  non-acceptance  in  either  of  the 
following  cases : 

1.  Where  the  drawee  is  dead  (a),  or  has  absconded  {d), 
or  is  a  fictitious  person  or  a  person  not  having  capacity 
to  contract  by  bill ;  (c) 

2.  Where  after  the  exercise  of  reasonable  diligence, 
presentment  cannot  be  made ;  (d) 

3.  Where  although  presentment  has  been  irregular, 
acceptance  has  been  refused  on  some  other  ground,  {e) 

*  In  the  New  York  Act  these  sections  should  read,  "Sections  132  and 
145,"  — Ed. 


68 


THE   NEGOTIABLE   INSTRUMENTS   LAW 


{a)  [See  Bills  of  Exchange  Act,  sec- 
tion 41,  subdivision  (2);  Daniel  on 
Neg.  Inst.,  section  1178.]  Compare 
§  242  [145],  subsec.  2,  a):te. 

(^)  [Daniel  on  Neg.  Inst.,  section 
1 144.  By  the  Bills  of  Exchange  Act 
the  bankruptcy  of  the  drawee  will  ex- 
cuse presentment  for  acceptance.  But 
this  is  not  the  rule  of  the  Commercial 
Law.  Daniel  on  Neg.  Inst.,  sections 
1171-1172.] 

((■)  [See  Daniel  on  Neg.  Inst.,  sec- 
tion iiii.] 

(d)  [Daniel  on  Neg.  Inst.,  section 
1059,  et  seq.]     See  §  142  [82],  subsec.  i, 


ante;  also  §  183  [112].  ante. 

{e)  "  This  is,  perhaps,  new  law,  and 
is  important,  having  regard  to  the  next 
subsection."  Chalmers,  p.  I37n.  The 
subsection  referred  to  reads:  "  The 
fact  that  the  holder  has  reason  to  be- 
lieve that  the  bill,  on  presentment,  will 
be  dishonored,  does  not  excuse  pre- 
sentment." This  provision  does  not 
appear  in  the  American  Act.  But  if 
the  drawer  has  no  right  to  expect  ac- 
ceptance, presentment  for  payment  is 
excused.     §  139  [79],  ante. 

Cases,  p.  641. 


§  246.  When  dishonored  by  non-acceptance.  [§  149] 

A  bill  is  dishonored  by  non-acceptance  : 

1.  When  it  is  duly  presented  for  acceptance,  and  such 
an  acceptance  as  is  prescribed  by  this  act  is  refused  or 
cannot  be  obtained ;  or 

2.  When  presentment  for  acceptance  is  excused  and 
the  bill  is  not  accepted. 

[Note.  —  See  Bills  of  Exchange  Act,  section  43,  subdivision  (i).] 

§  247.  Duty  of  holder  where  bill  not  accepted.  [§  150] 

Where  a  bill  is  duly  presented  for  acceptance  and  is 
not  accepted  within  the  prescribed  time,  the  person  present- 
ing it  must  treat  the  bill  as  dishonored  by  non-acceptance 
or  he  loses  the  right  of  recourse  against  the  drawer  and 
indorsers.  {a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  42.  The  language  of  the  Bills 
of  Exchange  Act  is,  "  within  the  customary  time,"  but  the  time  herein  is  fixed 
by  section  136.     (N.  Y.,  §  224.)  ] 

{a)  That  is,  due  notice  must  be  given  to  parties  secondarily  liable.  See,  how- 
ever, §  188  [117].  ante. 

§  248.  Rights  of  holder  where  bill  not  accepted.  [§  151] 

When  a  bill  is  dishonored  by  non-acceptance,  an  immediate 
right  of  recourse  against  the  drawers  and  indorsers  accrues 
to  the  holder,  and  no  presentment  for  payment  is  necessary. (a) 

[Note.  —  See  Bills  of  Exchange  Act,  section  43,  subdivision  (2).] 


PROTEST    OF   BILLS    OF   EXCHANGE.  69 

{a)    Cases,  pp.  641-642.     "The  imme-  I  nental  codes  the  holder  can  only  protest 


diate  right  of  recourse  arising  on  non- 
acceptance  is  an  exceptional  right,  and 
seems  peculiar  to  English  and  American 
law.  (Whitehead  v.  Walker,  9  M.  &  W., 
at  p.  516;  Watson  v.  Tarpley,  20  How. 
(U.  S.),  at  p.  519;  cf.  Dunn  v.  O'Keefe, 
5  M.  &  S.,  at  p.  289.)     Under  the  conti- 


the  bill  for  non-acceptance,  and  demand 
security  from  the  drawer  and  indorsers. 
(French  Code,  arts.  119,  120;  German 
Exchange  Law,  arts.  25-28.)  The 
effect  of  this  conflict  of  laws  does  not 
appear  to  have  been  judicially  consid- 
ered."    Chalmers,  p.  140. 


ARTICLE  XIII. 

PROTEST  OF  BILLS  OF  EXCHANGE. 

*  Section  260.   In  what  cases  protest  necessary. 

261.  Protest;  how  made. 

262.  Protest;  by  whom  made. 

263.  Protest;  when  to  be  made. 

264.  Protest;  where  made. 

265.  Protest  both  for  non-acceptance  and  non-payment. 

266.  Protest  before  maturity  where  acceptor  insolvent. 

267.  When  protest  dispensed  with. 

268.  Protest;  where  bill  is  lost,  et  cetera. 

§  260.  In  what  cases  protest  necessary.  [§  152] 

Where  a  foreign  bill  (a),  appearing  on  its  face  to  be  such  is 
dishonored  by  non-acceptance,  it  must  be  duly  protested  for 
non-acceptance,  and  where  such  a  bill  which  has  not  previ- 
ously been  dishonored  by  non-acceptance  is  dishonored  by 
non-payment,  it  must  be  duly  protested  for  non-payment.  If  it 
is  not  so  protested,  the  drawer  and  indorsers  are  discharged.  (/;) 
Where  a  bill  does  not  appear  on  its  face  to  be  a  foreign  bill, 
protest  thereof  in  case  of  dishonor  is  unnecessary,  (c) 

[Note.  —See  Bills  of  Exchange  Act,  section  51,  subdivision  (2).] 


tested.     (Ex   parte  Lowenthal,   L.  R.  9 
Ch.  591.)"     Chalmers,  p.  172. 
(t)     Cases,  p.  643. 


{a)     See  §  213  [129],  tin^e. 

(d)  Cases,  p.  643.  "  The  notice  of 
dishonor  is  not  bad  because  it  omits 
to   state    that    the    bill    has    been    pro- 

§  261.  Protest ;  how  made.  [§  I53] 

The  protest  must  be  annexed  to  the  bill,  or  must  contain  a 
copy  thereof  {a),  and  must  be  under  the  hand  and  seal  {l>)  of 
the  notary  making  it,  and  must  specify : 

I .  The  time  and  place  of  presentment ; 

*§  [152]  to  t^  [160]  in  the  other  States. 


70 


THE   NEGOTIABLE   INSTRUMENTS    LAW. 


2.  The  fact  that  presentment  was  made  and  the  manner 
thereof ; 

3.  The  cause  or  reason  for  protesting  the  bill ; 

4.  The  demand  made  and  the  answer  given,  if  any,  or 
the  fact  that  the  drawee  or  acceptor  could  not  be  found,  (c) 


(a)  [See  Bills  of  Exchange  Act,  sec- 
tion 51,  subdivision  (7);  Daniel  on 
Neg.  Inst.,  section  944.] 

(I/)  [Cases,  pp.  503,  569.  In  some  of 
the  States,  as  in  New  York,  the  use  of 
a  seal  is  not  necessary  where  the  cer- 
tificate is  to  be  used  in  the  State;  but  a 
seal   is   probably  desirable    where    the 


certificate   is  to  be  used  in  other  juris 
dictions.] 

(<r)  Cases,  pp.  643-647.  [See  Daniel 
on  Neg.  Inst.,  sections  950-958.  The 
Bills  of  Exchange  Act  provides  that 
protest  must  specify  the  person  at 
whose  request  the  bill  is  protested,  but 
this  makes  a  change  in  the  law.  Dan- 
iel on  Neg.  Inst.,  section  956.] 


§  262.  Protest ;  by  whom  made.  [§  154] 

Protest  may  be  made  by : 

1.  A  notary  public ;  (a)  or 

2.  By  any  respectable  resident  of  the  place  where  the 
bill  is  dishonored,  in  the  presence  of  two  or  more  credible 

witnesses.  (/;) 

[Note. — See   Todd    v.  Neal's   Administrator,  49   Ala.    273;    Daniel   on   Neg. 
Inst.,  sections  934-934a;  Civil  Code  of  California,  3226.] 


(a)  Cases,  pp.  648-650.  "  In  Eng- 
land the  notarial  presentment  of  the 
bill  to  the  drawee  or  acceptor  is  almost 
always  made  by  the  notary's  clerk- 
(Brooks'  Notary,  4th  ed.,  pp.  78  and 
13S.)     In    America    the    validity    of    a 


protest  founded  on  such  presentment 
has  been  doubted.  (See  Parsons  on 
Bills,  p.  641.)  "     Chalmers,  p.  175. 

(/')     See   Bills  of  Exchange  Act,  sec- 
tion 94. 


§  263    Protest ;  when  to  be  made.  [§  155] 

When  a  bill  is  protested,  such  protest  must  be  made  on  the 
day  of  its  dishonor  (a),  unless  delay  is  excused  as  herein 
provided,  {d)  When  a  bill  has  been  duly  noted  (c),  the  pro- 
test may  be  subsequently  extended  as  of  the  date  of  the 
noting.  (</) 


(a)  [See  Bills  of  Exchange  Act,  sec- 
tion 51,  subdivision  (4);  Dennistoun  v. 
Stewart,  19  How.  606;  Byles  on  Bills, 
257.]  "  Before  the  act  it  was  not  clear 
that  a  bill  could  not  be  lawfully  noted 
for  protest  on  the  day  after  its  dis- 
honor;   but   the   business   members    of 


the  Select  Committee  were  unanimous 
in  thinking  that  noting  on  the  day  of 
dishonor  should  be  made  obligatory." 
Chalmers,  p.  173. 

(^)     See  §  267  [159],/^.?^. 

(r)  "  By'  noting  '  is  meant  the  min- 
ute made   by  a  notary  public  on  a  dis- 


PROTEST    OF   BILLS   OF   EXCHANGE. 


71 


honored  bill  at  the  time  of  its  dishonor. 
The  formal  notarial  certificate,  or  pro- 
test, attesting  the  dishonor  of  the  bill, 
is  based  upon  the  noting.  The  '  noting, ' 
consists  of  the  notary's  initials,  the 
date,  the  noting  charges,  and  a  mark 
referring  to  the  notary's  register  writ- 


ten on   the   bill  itself."     Chalmers,   p. 
171. 

{d)  Cases,  p.  647.  [Bailey  v.  Dozier, 
6  How.  23;  Cayuga  Co.  Bank  v.  Hunt, 
2  Hill.  635;  Daniel  on  Neg.  Inst.,  section 
940;  Byles  on  Bills,  257.] 


§  264.  Protest ;  where  made.  [§  iS6] 

A  bill  must  be  protested  at  the  place  where  it  is  dis- 
honored {a),  except  that  when  a  bill  drawn  payable  at  the 
place  of  business  or  residence  of  some  person  other  than  the 
drawee,  has  been  dishonored  by  non-acceptance,  it  must  be 
protested  for  non-payment  at  the  place  where  it  is  expressed 
to  be  payable,  and  no  further  presentment  for  payment  to, 
or  demand  on,  the  drawee  is  necessary,  {b) 


(a)  [See  Daniel  on  Neg.  Inst.,  sec- 
tion 935;  Byles  on  Bills,  217.] 

(6)  [Bills  of  Exchange  Act,  section 
51,  subdivision  (6);  2  and  3  William 
IV.,  ch.  98;  Daniel  on  Neg.  Inst.,  sec- 
tion 935;  Byles  on  Bills,  258.]  "  Sup- 
pose a  bill  is  drawn  on  B  in  Liverpool, 
'  payable   at   the   X   Bank  in  London.' 


265. 


It  is  dishonored  by  non-acceptance. 
It  is  to  be  protested  for  non-pay- 
ment in  London  without  any  fur- 
ther demand  on  B.  Ordinarily  the 
protest  recites  the  demand  on  the  ac- 
ceptor or  other  payer."  Chalmers, 
p.  174- 


Protest  both  for  non-acceptance  and  non-payment. 

[§  157] 

A  bill  which  has  been  protested  for  non-acceptance  may  be 
subsequently  protested  for  non-payment. 

[Note.  —  See  Bills  of  Exchange  Act,  section  51,  subdivision  (3).]  "  Protest 
in  such  case  might  be  necessary  for  the  purpose  of  charging  a  foreign  drawer 
or  indorser  in  his  own  country.  An  English  Act  can  only  lay  down  the  law  for 
the  United  Kingdom,  though  by  the  comity  of  nations  the  duties  of  the  holder 
would  generally  be  regarded  as  regulated  by  the  law  of  the  place  where  they 
are  to  be  performed.  *  *  *  Under  some  continental  codes  no  right  of  action 
arises  on  non-acceptance;  the  holder  can  demand  security  from  antecedent 
parties,  but  he  is  bound  to  re-present  the  bill  at  maturity."     Chalmers,  p.  172. 

§  266.  Protest  before  maturity  where  acceptor  insolvent. 

[§  158] 

Where  the  acceptor  has  been  adjudged  a  bankrupt  or  an 
insolvent  or  has  made  an  assignment  for  the  benefit  of  cred- 
itors, before  the  bill  matures,  the  holder  may  cause  the  bill 
to  be  protested  for  better  security  against  the  drawer  and 
indorsers. 


72  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

[Note.  —  See  Bills  of  Exchange  Act,  section  51,  subdivision  (5);  Daniel  on 
Neg.  Inst.,  section  530.]  "  Under  some  continental  codes,  when  the  acceptor 
fails  during  the  currency  of  a  bill,  security  can  be  demanded  from  the  drawer 
and  indorsers.  (German  Exchange  Law,  art.  29;  Netherlands  Code,  arts.  177, 
178.)  English  law  provides  no  such  remedy,  and  the  only  effect  of  such  a  protest 
in  England  is  that  the  bill  may  be  accepted  for  honor.  In  France,  if  the 
acceptor  fails,  the  bill  may  at  once  be  treated  as  dishonored  and  protested  for 
non-payment.     (French  Code,  art.  163;    Nouguier,  §  1277.)  "     Chalmers,  p.  173. 

§  267.  When  protest  dispensed  with.  [§  159] 

Protest  is  dispensed  with  by  any  circumstances  which  would 
dispense  with  notice  of  dishonor,  (a)  Delay  in  noting  or  pro- 
testing is  excused  when  delay  is  caused  by  circumstances 
beyond  the  control  of  the  holder  and  not  imputable  to  his 
default,  misconduct,  or  negligence.  (/;)  When  the  cause  of 
delay  ceases  to  operate,  the  bill  must  be  noted  or  protested 
with  reasonable  diligence. 

[Note.  — See  Bills  of  Exchange  Act,  section  51,  subdivision  (9).] 


(a)  Cases,  p.  562.  See  §§  180-186 
[109-115],  ante.  Does  this  incorporate 
§  188  [117],  ante?    See  Chalmers,  p.  176. 

(d)     Chalmers  cites:  Legge  v.  Thorpe, 


12  East,  171;  Campbell  v.  Webster,  15 
L.  J.  C.  P.  4;  Rothschild  v.  Currie,  i 
Q.  B.,  at  p.  47. 


§  268.  Protest  where  bill  is  lost,  et  cetera.  [§  i6o] 

Where  a  bill  is  lost  or  destroyed  or  is  wrongly  detained 
from  the  person  entitled  to  hold  it,  protest  may  be  made  on 
a  copy  or  written  particulars  thereof. 

[Note.  —  See  Bills  of  Exchange  Act,  section  51,  subdivision  (8);  Daniel  on 
Neg.  Inst.,  section  1464.]  "  Pothier,  No.  145;  Brooks'  Notary,  4th  ed.,  pp.  137 
and  217.  See  further  as  to  lost  bills,  sections  69  and  70  (Bills  of  Exchange  Act). 
The  particulars  can  usually  be  obtained  from  the  bill  book."  Chalmers, 
p.  I75n. 


ARTICLE  XIV. 

ACCEPTANCE  OF  BILLS  OF  EXCHANGE  FOR  HONOR. 

*  Section  280.  When  bill  may  be  accepted  for  honor. 

281.  Acceptance  for  honor;  how  made. 

282.  When  deemed  to  be  an  acceptance  for  honor  of  the  drawer. 

283.  Liability  of  acceptor  for  honor. 

284.  Agreement  of  acceptor  for  honor. 

285.  Maturity  of  bill  payable  after  sight;  accepted  for  honor. 

286.  Protest  of  bill  accepted  for  honor,  et  cetra. 


*§  [161]  to  §  [170]  in  the  other  States. 


ACCEPTANCE   OF   BILLS    OF   EXCHANGE   FOR   HONOR.  73 

Section  287.   Presentment  for  payment  to  acceptor  for  honor;  how  made. 

288.  When  delay  in  making  presentment  is  excused. 

289.  Dishonor  of  bill  by  acceptor  for  honor. 

Note.  —  See  Cases,  pp.  651-657. 

§  280.  When  bill  may  be  accepted  for  honor.  [§  i6i] 

Where  a  bill  of  exchange  has  been  protested  for  dishonor 
by  non-acceptance  or  protested  for  better  security  and  is  not 
overdue,  any  person  not  being  a  party  already  liable  thereon, 
may,  with  the  consent  of  the  holder,  intervene  and  accept  the 
bill  supra  protest  for  the  honor  of  any  party  liable  thereon 
or  for  the  honor  of  the  person  [for]*  whose  account  the  bill  is 
drawn.  The  acceptance  for  honor  may  be  for  part  only  of 
the  sum  for  which  the  bill  is  drawn ;  and  where  there  has 
been  an  acceptance  for  honor  for  one  party,  there  may  be  a 
further  acceptance  by  a  different  person  for  the  honor  of 
another  party. 

[Note.  —  See  Bills  of  Exchange  Act,  section  65,  subdivisions  (r)  and  (2); 
Byles  on  Bills,  262-266.  The  Bills  of  Exchange  Act  makes  no  provision  for 
different  acceptances  supra  protest;  but  this  is  authorized  by  the  commercial 
law.  Byles  on  Bills,  263.]  "  In  the  United  States,  as  in  England,  the  holder 
may  refuse  to  allow  acceptance  for  honor  (See  Story,  §  122),  for  he  may  wish  to 
exercise  his  immediate  right  of  recourse  which  arises  on  non-acceptance." 
Chalmers,  p.  226. 

§  281.  Acceptance  for  honor  ;  how  made.  [§  162] 

An  acceptance  for  honor  supra  protest  must  be  in  writing 
and  indicate  that  it  is  an  acceptance  for  honor,  and  must  be 
signed  by  the  acceptor  for  honor. 

[Note. — See  Bills  of  Exchange  Act,  section  65,  subdivision  (3).  The  Bills 
of  Exchange  Act  requires  the  acceptance  for  honor  to  be  written  on  the  bill,  but 
see  note  to  section  132  (N.  Y.,  §  220).] 

§  282.  When  deemed  to  be  an  acceptance  for  honor  of  the 
drawer.  [§  163] 

Where  an  acceptance  for  honor  does  not  expressly  state  for 
whose  honor  it  is  made,  it  is  deemed  to  be  an  acceptance  for 
the  honor  of  the  drawer. 

[Note.  —  See  Bills  of  Exchange  Act,  section  65,  subdivision  (4). 
*  Omitted  by  error  in  N.  Y.  Act.  —  Ed. 


74  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

§  283.  Liability  of  the  acceptor  for  honor.  [§  164] 

The  acceptor  for  honor  is  liable  to  the  holder  and  to  all 
parties  to  the  bill  subsequent  to  the  party  for  whose  honor 
he  has  accepted. 

[Note.  —  See  Bills  of  Exchange  Act,  section  66,  subdivision  (2).] 

§  284.  Agreement  of  acceptor  for  honor.  [§  165] 

The  acceptor  for  honor  by  such  acceptance  engages  that  he 
will  on  due  presentment  pay  the  bill  according  to  the  terms 
of  his  acceptance,  provided  it  shall  not  have  been  paid  by  the 
drawee,  and  provided  also,  that  it  shall  have  been  duly  pre- 
sented for  payment  and  protested  for  non-payment  and  notice 
of  dishonor  given  to  him. 

[Note.  — See  Bills  of  Exchange  Act,  section  66,  subdivision  (i).] 

§  285.  Maturity  of  bill  payable  after  sight ;  accepted  for  honor. 

[§  166] 
Where  a  bill  payable  after  sight  is  accepted  for  honor,  its 
maturity  is  calculated  from  the  date  of  the  noting  for  non- 
acceptance  and  not  from  the  date  of  the  acceptance  for  honor. 

[Note  —  See  Bills  of  Exchange  Act,  section  65,  subdivision  (5).]  "  This  section 
brings  the  law  into  accordance  with  mercantile  understanding,  and  gets  rid  of 
an  inconvenient  ruling  to  the  effect  that  maturity  was  to  be  calculated  from  the 
date  of  acceptance  for  honor.  (William  v.  Germaine,  7  B.  &  C.  46S.)  "  Chal- 
mers, p.  228. 

§  286.  Protest  of  bill  accepted  for  honor,  et  cetera.  [§  167] 

Where  a  dishonored  bill  has  been  accepted  for  honor  supra 
protest  or  contains  a  reference  in  case  of  need,  it  must  be 
protested  for  non-payment  before  it  is  presented  for  payment 
to  the  acceptor  for  honor  or  referee  in  case  of  need. 

[Note.  —  See  Bills  of  Exchange  Act,  section  67,  subdivision  (i).] 

§  287.  Presentment  for  payment  to  acceptor  for  honor  ;  how 
made.  [§  i68] 

Presentment  for  payment  to  the  acceptor  for  honor  must 
be  made  as  follows : 

1.  If  it  is  to  be  presented  in  the  place  where  the  pro- 
test for  non-payment  was  made,  it  must  be  presented 
not  later  than  the  day  following  its  maturity ; 

2.  If  it  is  to  be  presented  in  some  other  place  than 
the  place  where  it  was  protested,  then  it  must  be  for- 


PAYxMEXT   OF   BILLS    OF    EXCHANGE    FOR    HONOR.  75 

warded  within  the  time  specified  in  section  one  hundred 
and  four.* 

[Note.  —  See  Bills  of  Exchange  Act,  section  67,  subsec.  (2).  "  Doubts  hav- 
ing arisen  as  to  the  day  when  the  bill  should  be  again  presented  to  the  acceptor 
for  honor,  or  referee  in  case  of  need,  for  payment,  the  6  and  7  Will.  4,  c.  58, 
enacts,  that  it  shall  not  be  necessary  to  present,  or  in  case  the  acceptor  for 
honor  or  referee  live  at  a  distance,  to  forward  for  presentment,  till  the  day  fol- 
lowing that  on  which  the  bill  becomes  due."     Byles  on  Bills,  263.] 

§  288.  When  delay  in  making  presentment  is  excused.  [§  169] 

The  provisions  of  section  eighty-one  f  apply  where  there  is 
delay  in  making  presentment  to  the  acceptor  for  honor  or 
referee  in  case  of  need. 

§  289.  Dishonor  of  bill  by  acceptor  for  honor.  [§  170] 

When  the  bill  is  dishonored  by  the  acceptor  for  honor  it 
must  be  protested  for  non-payment  by  him. 

[Note.  —  Bills  of  Exchange  Act,  section  67,  subdivision  (4.)] 


ARTICLE   XV. 

PAYMENT  OF  BILLS  OF  EXCHANGE  FOR  HONOR. 

I  Section  300.  Who  may  make  payment  for  honor. 

301.  Payment  for  honor;  how  made. 

302.  Declaration  before  payment  for  honor. 

303.  Preference  of  parties  offering  to  pay  for  honor. 

304.  Effect  on  subsequent  parties  where  bill  is  paid  for  honor. 

305.  Where  holder  refuses  to  receive  payment  supra  protest. 

306.  Rights  of  payer  for  honor. 

Note.  —  See  Cases,  pp.  658-660. 

§  300.  Who  may  make  payment  for  honor.  [§  171] 

Where  a  bill  has  been  protested  for  non-payment,  any  per- 
son may  intervene  and  pay  it  supra  protest  for  the  honor  of 
any  person  liable  thereon  or  for  the  honor  of  the  person  for 
whose  account  it  was  drawn. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision  (i);  Byles  on 
Bills,  267-269;  Daniel  on  Neg.  Inst.,  section  1254.] 

*  N.  Y.  Act  should  read  "  section  175."  —  Ed. 
f  N.  Y.  Act  should  read  "  section  141."  —  Ed. 
t%  [Jf?!]  to  §  [177]  in  the  other  States. 


'j()  THE   NEGOTIABLE    INSTRUMENTS   LAW. 

§  301.  Payment  for  honor  ;  how  made.  [§  172] 

The  payment  for  honor  supra  protest  in  order  to  operate  as 
such  and  not  as  a  mere  voluntary  payment  must  be  attested 
by  a  notarial  act  of  honor  which  may  be  appended  to  the  pro- 
test or  form  an  extension  to  it. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68-  subdivision  (3);  Byles  on 
Bills,  267;  Daniel  on  Neg.  Inst.,  section  1258.] 

§  302.  Declaration  before  payment  for  honor.  [§  173] 

The  notarial  act  of  honor  must  be  founded  on  a  declaration 
made  by  the  payer  for  honor  or  by  his  agent  in  that  behalf 
declaring  his  intention  to  pay  the  bill  for  honor  and  for 
whose  honor  he  pays. 

[Note.  — See  Bills  of  Exchange  Act,  section  68,  subdivision  (4).] 

§  303.  Preference  of  parties  offering  to  pay  for  honor.     [§  174] 

Where  two  or  more  persons  offer  to  pay  a  bill  for  the  honor 
of  different  parties,  the  person  whose  payment  will  discharge 
most  parties  to  the  bill  is  to  be  given  the  preference 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision  (2).] 

§  304.  Effect  on   subsequent   parties  where  bill  is  paid  for 
honor.  [§  I75J 

Where  a  bill  has  been  paid  for  honor  all  parties  subsequent 
to  the  party  for  whose  honor  it  is  paid  are  discharged,  but 
the  payer  for  honor  is  subrogated  for,  and  suceeds  to,  both 
the  rights  and  duties  of  the  holder  as  regards  the  party  for 
whose  honor  he  pays  and  all  parties  liable  to  the  latter. 

[Note. — See  Bills  of  Exchange  Act,  section  68,  subdivision  (5);  Daniel  on 
Neg.  Inst.,  section  1255.] 

§  305.  Where  holder  refuses  to  receive  payment  supra  pro- 
test [§  176] 
Where  the  holder  of  a  bill  refuses  to  receive  payment  supra 
protest,  he  loses  his  right  of  recourse  against  any  party  who 
would  have  been  discharged  by  such  payment. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision  (7).] 

§  306.  Rights  of  payer  for  honor.  [§  I77] 

The  payer  for  honor  on  paying  to  the  holder  the  amount 

of  the  bill  and  the  notarial  expenses  incidental  to  its  dis- 


BILLS   IN   A   SET.  'J^ 

honor,    is   entitled   to   receive   both  the  bill  itself  and  the 
protest. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision  (6).] 


ARTICLE  XVI. 

BILLS  IN  A  SET. 

*  Section  310.  Bills  in  sets  constitute  one  bill. 

311.  Rights  of  holders  where  different  parts  are  negotiated. 

312.  Liability  of  holder  who  indorses  two  or  more  parts  of  a  set  to 

different  persons. 

313.  Acceptance  of  bills  drawn  in  sets. 

314.  Payment  by  acceptor  of  bills  drawn  in  sets. 

315.  Effect  of  discharging  one  of  a  set 

Note.  —  See  Cases,   pp.  661-665. 

§  310.  Bills  in  sets  constitute  one  bill.  [§  178] 

Where  a  bill  is  drawn  in  a  set,  each  part  of  the  set  being 
numbered  and  containing  a  reference  to  the  other  parts,  the 
whole  of  the  parts  constitute  one  bill. 

[Note. — See  Bills  of  Exchange  Act,  section  71,  subdivision  (i);  Byles  on 
Bills,  387;  Daniel  on  Neg.  Inst.,  section  113.]  "  If  one  part  omit  reference  to 
the  rest,  it  becomes  a  separate  bill  in  the  hands  of  a  bona  fide  holder.  It  has 
been  held  that  an  agreement  to  deliver  up  an  unaccepted  bill  drawn  in  a  set  is 
an  agreement  to  deliver  up  all  the  parts  in  existence  (Kearney  v.  West  Granada 
Co.,  26  L.  J.  Ex.  15)  ;  and  also  that  a  person  who  negotiates  a  bill  of  exchange 
drawn  in  a  set,  is  bound  to  deliver  up  all  the  parts  in  his  possession,  but  by 
negotiating  one  part  he  does  not  warrant  that  he  has  the  rest.  (Pinard  v. 
Klockman,  32  L.  J.  Q.  B.  82.)  In  England  the  obligation  to  give  a  set  is  pre- 
sumably a  matter  of  bargain."     Chalmers,  p.  235. 

§  311.  Rights  of  holders  where  different  parts  are  negotiated. 

[§  179] 
Where  two  or  more  parts  of  a  set  are  negotiated  to  different 
holders  in  due  course,  the  holder  whose  title  first  accrues  is 
as  between  such  holders  the  true  owner  of  the  bill.  But 
nothing  in  this  section  affects  the  rights  of  a  person  who  in 
due  course  accepts  or  pays  the  part  first  presented  to  him. 

[Note.  —  See  Bills  of  Exchange  Act,  section  71,  subdivision  (3);  Byles  on  Bills, 
389.]  ^ 

*§  [178]  to  [183]  in  the  other  States. 


78  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

§  312.  Liability  of  holder  who  indorses  two  or  more  parts  of  a 
set  to  different  persons.  [§  180] 

Where  the  holder  of  a  set  indorses  two  or  more  parts  to 
different  persons  he  is  liable  on  every  such  part,  and  every 
indorser  subsequent  to  him  is  liable  on  the  part  he  has  himself 
indorsed,  as  if  such  parts  were  separate  bills. 

[Note.  — See  Bills  of  Exchange  Act,  section  71,  subdivision  (2);  Holdsworth 
V.  Hunter,  10  B.  &  C.  449;   Byles  on  Bills,  389.] 

§  313.  Acceptance  of  bills  drawn  in  sets.  [§  i8i] 

The  acceptance  may  be  written  on  any  part,  and  it  must  be 
written  on  one  part  only.  If  the  drawee  accepts  more  than 
one  part,  and  such  accepted  parts  are  negotiated  to  different 
holders  in  due  course,  he  is  liable  on  every  such  part  as  if  it 
were  a  separate  bill. 

[Note.  —  See  Bills  of  Exchange  Act,  section  71,  subdivision  (4);  Holdsworth 
V.  Hunter,  10  B.  &  C.  449;  Byles  on  Bills,  3S9.] 

§  314.  Payment  by  acceptor  of  bills  drawn  in  sets.  [§  182] 

When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it  without 
requiring  the  part  bearing  his  acceptance  to  be  delivered  up 
to  him,  and  that  part  at  maturity  is  outstanding  in  the  hands 
of  a  holder  in  due  course,  he  is  liable  to  the  holder  thereon. 

[Note. — See  Bills  of  Exchange  Act,  section  71,  subdivision  (5);  Byles  on 
Bills,  389.] 

§  315.  Effect  of  discharging  one  of  a  set.  [§  183] 

Except  as  herein  otherwise  provided,  where  any  one  part 
of  a  bill  drawn  in  a  set  is  discharged  by  payment  or  other- 
wise the  whole  bill  is  discharged. 

[Note.  —  See  Bills  of  Exchange  Act,  section  71,  subdivision  (6);  Byles  on 
Bills,  388.] 

ARTICLE  XVII. 

PROMISSORY  NOTES  AND  CHECKS. 

*  Section  320.  Promissory  note  defined. 

321.  Check  defined. 

322.  Within  what  time  a  check  must  be  presented. 

323.  Certification  of  check;  effect  of. 

324.  Effect  where  holder  of  check  procures  it  to  be  certified. 

325.  When  check  operates  as  an  assignment. 


*  ^  [184]  to  g  [1S9]  in  the  other  States. 


PROMISSORY   NOTES   AND   CHECKS. 


79 


§  320.  Promissory  note  defined.  [§  184] 

A  negotiable  promissory  note  within  the  meaning  of  this 
act  is  an  unconditional  promise  in  writing  made  by  one  per- 
son to  another  signed  by  the  maker  engaging  to  pay  on 
demand  or  at  a  fixed  or  determinable  future  time,  a  sum  cer- 
tain in  money  to  order  or  to  bearer,  {a)  Where  a  note  is 
drawn  to  the  maker's  own  order,  it  is  not  complete  until 
indorsed  by  him.  [b) 

[Note.  —  See  Bills  of  Exchange  Act,  section  83.]  "A  bank  note  may  be 
defined  as  a  promissory  note  issued  by  a  banker  payable  to  bearer  on  demand. 
But  a  bank  note  differs  from  an  ordinary  note  in  various  important  respects. 
Among  others  it  may  be  reissued  after  payment.  See  further  distinctions 
pointed  out  by  Bramvvell,  B.  (Lichfield  Union  v.  Greene,  26  L.  J.  Ex.,  at 
p.  142.)"     Chalmers,  p.  263. 

former  New  York  Statute.  (Carn- 
wright  V.  Gray,  127  N.  Y.  92.)  This 
section  changes  the  New  York  law  and 
confines  the  operation  of  the  Act  to 
negotiable  notes. 

(/')     See  §  27  [8],  subsec.  2.  and  55  28 
[9],  subsec.  5,  ante. 


{a)  Cases,  pp.  666-673.  See  §  20 
[i],  ante,  and  cases  under  that  section. 
See  generally  on  form  and  interpreta- 
tion, §§  20-42  [1-23],  ante. 

The  English  Act  includes  notes  pay- 
able "  To,  or  to  the  order  of,  a  specified 
person  or  to  bearer,"  that  is,  it  includes 
non-negotiable  notes.     So  also  was  the 


§  321.  Check  defined.  [§  185] 

A  check  is  a  bill  of  exchange  drawn  on  a  bank  {a),  payable 
on  demand.  (/;)  Except  as  herein  otherwise  provided,  the 
provisions  of  this  act  applicable  to  a  bill  of  exchange  payable 
on  demand  apply  to  a  check,  {c) 


(a)  Cases,  pp.  673-676.  [See  Bills 
of  Exchange  Act,  section  73;  Bull  v. 
Kasson,  123  U.  S.  105;  Hopkinson  v. 
Foster,  L.  R.  18  Eq.  74.]  See  §  2 
[General  Provisions],  ante,  defining 
"  bank." 

{6)  [Daniel  on  Neg.  Inst.,  §  1574.] 
(c)  "  The  Act  is  declaratory  in  so 
far  as  it  defines  a  check  as  a  bill  of  ex- 
change. (M'Lean  v.  Clydesdale  Bank, 
L.  R.  9  App.  Cas.  95.)  It  is  no  part  of 
the  definition  that  a  check  should  be  an 
inland  bill,  or  that  it  should  be  drawn 
by  a  customer  upon  his  banker.  *  *  * 
See  checks  compared  with  and  distin- 
guished from  ordinary  bills  by  Parke, 
B.  (9  Moore  P.  C,  at  p.  69),  Erie,  J., 
and  Byles,  J.  (8  C.  B.  N.  S.,  at  pp.  380, 


381,  as  modified  by  L.  R.  19  Eq.,  at  p. 
76,  Jessel,  M.  R.),  Palles,  C.  B.  (10  Ir. 
R.  C.  L.,  at  p.  490),  and  the  Supreme 
Court  of  the  United  States.  (10  Wal- 
lace, at  p.  647.)  All  checks  are  bills  of 
exchange,  but  all  bills  of  exchange  are 
not  checks;  therefore,  an  authority  to 
draw  checks  does  not  necessarily  in- 
clude an  authority  to  draw  bills.  Fors- 
ter  v.  Mackreth,  L.  R.  2  Ex.  163.) 
Apart  from  statute,  the  distinctions  be- 
tween checks  and  ordinary  bills  of  ex- 
change arise  from  the  relationship  of 
banker  and  customer  subsisting  be- 
tween the  drawer  and  drawee  of  a 
check.  A  check  is  intended  for  prompt 
presentment,  while  a  note  payable  on 
demand  is  deemed   to  be  a  continuing 


8o  THE   NEGOTIABLE   INSTRUMENTS   LAW. 

security.     (Brooks  v.  Mitchell,  g  M.  &  I  son,  L.  R.  3  C.  P.,  at  p.  579.)  "     Chalm- 
W.,  at  p.  18;  Chartered  Bank   v.  Dick- 1  ers,  pp.  245-246. 

§  322.  Within  wliat  time  a  check  must  be  presented.      [§  i86] 

A  check  must  be  presented  for  payment  within  a  reasonable 
time  after  its  issue  or  the  drawer  will  be  discharged  from 
liability  thereon  to  the  extent  of  the  loss  caused  by  the 
delay,  {a) 

[Note.  —  See  Smith  v  Jones,  2  Bush.  103;  Cork  v.  Bacon,  45  Wis.  192;  Bull 
V.  Kasson,  123  U.  S.  105;  Daniel  on  Neg.  Inst.,  sections  1586-1600.]  See  Bills 
of  Exchange  Act,  section  74. 


(a)  Cases,  pp.  676-681.  See  "  rea- 
sonable time,"  defined  in  §  4  [General 
Provisions],  anie.     Independent  of  stat- 


of  the  bank  to  pay  a  check,  if  the  check 
is  presented  for  payment  within  ten 
days  from   the  date   thereof;  "   but  this 


ute  a  check  must  be  presented   or  for-    was    struck    out    of    the    final     draft. 


warded  for  presentment  on  the  day 
after  it  is  received.  Chalmers,  p. 
248.  The  draft  of  the  American  Act 
originally  contained  the  following: 
"  The  death  of  the  drawer  does  not 
operate  as  a  revocation  of  the  authority 


[This  was  taken  from  the  statutes  of 
Massachusetts  (Pub.  St.  Supp.  1888, 
ch.  210.)  There  seems  to  be  some 
doubt  as  to  the  common-law  rule.  See 
Daniel  on   Neg.    Inst.,  section   i6i8b.] 


§  323,  Certification  of  check  ;  effect  of.  [§  187] 

Where  a  check  is  certified  by  the  bank  on  which  it  is  drawn 
the  certification  *  is  equivalent  to  an  acceptance,  (a) 

[Note. —  See  Merchants'  Bank  v.  State  Bank,  lo  Wall.  648;  Cooke  v.  State 
Nat.  Bank,  52  N.  Y.  96;  Farmers  and  Mechanics'  Bank  v.  Butchers  and 
Drovers'  Bank,  16  N.  Y.  125.] 

(a)     Cases,  pp.  682-685. 

§  324.  Effect  where  the  holder  of  check  procures  it  to  be  certi- 
fied. [§  188] 
Where  the  holder  of  a  check  procures  it  to  be  accepted  or 
certified  the  drawer  and  all  indorsers  are  discharged  from  lia- 
bility thereon,  (a) 

j^NoTE.  —  See  Minot  v.  Russ,  156  Mass.  458;  Metropolitan  Bank  v.  Jones,  137 
111.  634;  Meridan  Nat.  Bank  v.  First  Nat.  Bank  (Ind.),  33  N.  E.  Rep.  247;  First 
Nat.  Bank  v.  Leach,  52  N.  Y.  350.] 

{a)     Cases,  pp.  682-685. 


*  "  Certificate  "  appears  in  N.  Y.  Act  by  mistake.— Ed. 


NOTES   GIVEN   FOR   A   SPECULATIVE    CONSIDERATION. 


8r 


§  325.  When  check  operates  as  an  assignment.  [§  189] 

A  check  of  itself  does  not  operate  as  an  assignment  of  any 
part  of  the  funds  to  the  credit  of  the  drawer  with  the  bank, 
and  the  bank  is  not  liable  to  the  holder,  unless  and  until  it 
accepts  or  certifies  the  check,  (a) 

[Note.  —  See  Bank  v.  Millard,  lo  Wall.  152;  Bank  v.  Schuler,  120  U.  S.  511; 
Bank  v.  Whitman,  94  U.  S.  343,  344;  St.  L.  &  S.  F.  R'y  Co,  v.  Johnston,  133 
U.  S.  566;  Attorney-General  v.  Continental  Life  Insurance  Co.,  71  N.  Y.  325. 
330;  First  Nat.  Bank  of  Union  Mills  v.  Clark,  134  N.  Y.  368;  O'Connor  v. 
Mechanics'  Bank,  124  N.  Y.  324;  Covert  v.  Rhodes,  48  Ohio  St.  66;  Pickle  v. 
Peoples'  Nat.  Bank,  88  Tenn.  3C0;  Boctcher  v.  Colorado  Nat.  Bank,  15  Colo. 
16;  Hopkinson  v.  Foster,  L.  R.  18  Eq.  74;  Contra,  Fonner  v.  Smith,  31  Neb. 
107:  Munn  V.  Burch,  25  111.  35;  Bank  v.  Patton,  109  111.  470,  485.]  See  §  211 
[127],  ante. 

(a)    Cases,  pp.  685-688. 


ARTICLE  XVIII.* 

NOTES   GIVEN    FOR   A   PATENT   RIGHT  AND    FOR   A   SPECULATIVE 

CONSIDERATION. 

Section   330.  Negotiable  instruments  given  for  patent  rights. 

331.  Negotiable  instruments  given  for  a  speculative  consideration. 

332.  How  negotiable  bonds  are  made  non-negotiable. 


§  330.  Negotiable  instruments  given  for  patent  rights. 

A  promissory  note  or  other  negotiable  instrument,  the 
consideration  of  which  consists  wholly  or  partly  of  the  right 
to  make,  use  or  sell  any  invention  claimed  or  represented  by 
the  vendor  at  the  time  of  sale  to  be  patented,  must  contain 
the  words  "given  for  a  patent  right"  prominently  and  legibly 
written  or  printed  on  the  face  of  such  note  or  instrument 
above  the  signature  thereto ;  and  such  note  or  instrument  in 
the  hands  of  any  purchaser  or  holder  is  subject  to  the  same 
defenses  as  in  the  hands  of  the  original  holder  {a) ;  but  this 
section  does  not  apply  to  a  negotiable  instrument  given 
solely  for  the  purchase  price  or  the  use  of  a  patented  article. 


{a)  It  is  a  misdemeanor,  to  take, 
sell,  or  transfer  such  an  instrument, 
knowing  the  consideration  to  be  as 
above     described,     unless     the    words 


"  given  for  a  patent  right  "  appear  on 
the  instrument  above  the  signature. 
N.  Y.  Penal  Code,  §  384m  (Laws  of  N. 
Y.  1897,  c.  613). 


Not  a  part  of  the  Negotiable  Instruments  Law  in  other  states. —  Ed. 

NEGOT.  INSTRUMENTS  —  6 


82  THE    NEGOTIABLE    INSTRUMENTS   LAW. 

§  331.  Negotiable  instrument  for  a  speculative  consideration. 

If  the  consideration  of  a  promissory  note  or  other  negoti- 
able instrument  consists  in  whole  or  in  part  of  the  purchase 
price  of  any  farm  product,  at  a  price  greater  by  at  least  four 
times  than  the  fair  market  value  of  the  sam.e  product  at  the 
time,  in  the  locality,  or  of  the  membership  and  rights  in  an 
association,  company  or  combination  to  produce  or  sell  any 
farm  product  at  a  fictitious  rate,  or  of  a  contract  or  bond  to 
purchase  or  sell  any  farm  product  at  a  price  greater  by  four 
times  than  the  market  value  of  the  same  product  at  the  time 
in  the  locality,  the  words,  "given  for  a  speculative  considera- 
tion," or  other  words  clearly  showing  the  nature  of  the  con- 
sideration, must  be  prominently  and  legibly  written  or  printed 
on  the  face  of  such  note  or  instrument,  above  the  signature 
thereof  {a) ;  and  such  note  or  instrument,  in  the  hands  of  any 
purchaser  or  holder,  is  subject  to  the  same  defenses  as  in  the 
hands  of  the  original  owner  or  holder. 

{a)     See   N.  Y.    Penal   Code,   §   38411.  (Laws  of  N.  Y.  1897,  c.  613.) 

§  332.  How  negotiable  bonds  are  made  non-negotiable. 

The  owner  or  holder  of  any  corporate  or  municipal  bond 
or  obligation  (except  such  as  are  designated  to  circulate  as 
money,  payable  to  bearer),  heretofore  or  hereafter  issued  in 
and  payable  in  this  state,  but  not  registered  in  pursuance  of 
any  state  law,  may  make  such  bond  or  obligation,  or  the 
interest  coupon  accompanying  the  same,  non-negotiable,  by 
subscribing  his  name  to  a  statement  indorsed  thereon,  that 
such  bond,  obligation  or  coupon  is  his  property ;  and  thereon 
the  principal  sum  therein  mentioned  is  payable  only  to  such 
owner  or  holder,  or  his  legal  representatives  or  assigns, 
unless  such  bond,  obligation  or  coupon  be  transferred  by 
indorsement  in  blank,  or  payable  to  bearer,  or  to  order,  with 
the  addition  of  the  assignor's  place  of  residence. 

ARTICLE  XIX.* 

LAWS  REPEALED;  WHEN  TO  TAKE  EFFECT. 

Section    340.   Laws  repealed. 

341.  When  to  take  effect. 

§  340.  Laws  repealed. 

The  laws  or  parts  thereof  specified  in  the  schedule  hereto 
annexed,  are  hereby  repealed. 

*  Applies  only  in   New  York. — Ed. 


APPENDIX   A.  83 

§  341.  When  to  take  effect. 

This  chapter  shall  take  effect  on  the  first  day  of  October, 
eighteen  hundred  and  ninety-seven. 

Schedule  of  Laws  Repealed. 

Revised  Statutes.  Sections.  Subject  matter. 

R.  S. ,  pt.  II,  ch.  4,  tit.  II All Bills  and  notes. 

Laws  of  Chapter.  Sections.  Subject  matter, 

1835 141 . . .    .     All Notice  of  protest ;  how  given. 

1857....     416 All Commercial  paper. 

1865 309 All Protest  of  foreign  bills,  etc. 

1870 438 All Negotiability     of     corporate 

bonds;  how  limited. 

1871....     84 All Negotiable  bonds ;  how  made 

non-negotiable. 

1873....      595 All Negotiable  bonds;  how  made 

negotiable. 

1877 65 1,3 Negotiable  instruments  given 

for  patent  rights. 

1887....  461 All Effect  of  holidays  upon  pay- 
ment of  commercial  paper. 

1 888 ....     229 All One  hundredth  anniversary  of 

the  inauguration  of  George 
Washington. 

1891 ....     262 I Negotiable  instruments  given 

for  a  speculative  purpose. 

1894 ....     607 All Days  of  grace  abolished. 


APPENDIX   A. 

Laws  of  New  York,  1897,  chapter  614. 

An  act  to  amend  the  statutory  construction  law,  in  relation 
to  public  holidays. 

Became  a  law  May  ig,   1897,   with  the  approval  of  the  Governor.     Passed,  a 
majority  being  present. 

The  People  of  the  State  of  New  York,  represented  in  Senate  ajid 
Assembly,  do  enact  as  follows  : 

Section  i.  Section  twenty-four  of  chapter  six  hundred  and 
seventy-seven  of  the  laws  of  eighteen  hundred  and  ninety- 
two,  entitled  "An  act  relating  to  the  construction  of  statutes, 


84  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

constituting  chapter  one  of  the  general  laws,"  is  hereby 
amended  to  read  as  follows : 

§  24.  Public  Holidays ;  half  holidays.  —  The  term  holiday 
includes  the  following  days  in  each  year:  The  first  day  of 
January,  known  as  New  Year's  day;  the  twelfth  day  of 
February,  known  as  Lincoln's  birthday;  the  twenty-second 
day  of  February,  known  as  Washington's  birthday;  the 
thirtieth  day  of  May,  known  as  Memorial  day;  the  fourth 
day  of  July,  known  as  Independence  day ;  the  first  Monday 
of  September,  known  as  Labor  day,  and  the  twenty-fifth  day 
of  December,  known  as  Christmas  day,  and  if  either  of  such 
days  is  Sunday,  the  next  day  thereafter ;  each  general  elec- 
tion day  and  each  day  appointed  by  the  president  of  the 
United  States  or  by  the  governor  of  this  State  as  a  day  of 
general  thanksgiving,  general  fasting  and  prayer,  or  other 
general  religious  observances.  The  term,  half-holiday, 
includes  the  period  from  noon  to  midnight  of  each  Saturday 
which  is  not  a  holiday.  The  days  and  half  days  aforesaid 
shall  be  considered  as  the  first  day  of  the  week,  commonly 
called  Sunday,  and  as  public  holidays  or  half-holidays,  for 
all  purposes  whatsoever  as  regards  the  transaction  of  busi- 
ness in  the  public  offices  of  this  State,  or  counties  of  this 
State.  On  all  other  days  and  half  days,  excepting  Sundays, 
such  offices  shall  be  kept  open  for  the  transaction  of  business. 

§  2.  Chapter  twenty-seven  of  the  laws  of  eighteen  hundred 
and  seventy  five,  chapter  thirty  of  the  laws  of  eighteen  hun- 
dred and  eighty-one,  chapter  two  hundred  and  eighty-nine  of 
the  laws  of  eighteen  hundred  and  eighty-seven  and  chapter 
six  hundred  and  three  of  the  laws  of  eighteen  hundred  and 
ninety-five,  are  hereby  repealed. 

§  3.  This  act  shall  take  effect  October  first,  eighteen  hun- 
dred and  ninety-seven. 


ENGLISH 

BILLS  OF  EXCHANGE  ACT,  1882. 

45  AND  46  Vict.  Ch.  6i. 


BILLS  OF  EXCHANGE  ACT,  1882. 

45  AND  46  Vict.,  Ch.  61. 

An  act  to  codify  the  law  relating  to  bills  of  exchange,  cheques, 
and  promissory  notes. 

[ISth  August,  1882.] 

Be  it  enacted  by  the  Queen's  Most  Excellent  Majesty,  by  and  with  the 
advice  and  consent  of  tiie  Lords  Spii'itual  and  Temporal,  and  Commons,  in 
this  present  Parliament  assembled,  and  by  the  authority  of  the  same,  as 
follows: 

PART  I. 
Preliminary. 

1.  Short  title. 

This  act  may  be  cited  as  the  Bills  of  Exchange  Act,  1883. 

2.  Interpretation  of  terms. 

In  this  act,  unless  the  context  otherwise  requires  — 

"Acceptance  "  means  an  acceptance  completed  by  delivery  or  notification. 

"Action"  includes  counter-claim  and  set-off. 

"  Banker  "  includes  a  body  of  persons,  whether  incorporated  or  not,  who 
carry  on  the  business  of  banking. 

"Bankrupt"  includes  any  person  whose  estate  is  vested  in  a  trustee  or 
assignee,  under  the  law  for  the  time  being  in  force  relating  to  bank- 
ruptcy. 

"  Bearer  "  means  the  person  in  possession  of  a  bill  or  note  which  is  payable 
to  bearer. 

"Bill "  means  bill  of  exchange,  and  "note "  means  promissory  note. 

"  Delivery  "  means  transfer  of  possession,  actual  or  constructive,  from  one 
person  to  another. 

"  Holder  "  means  the  payee  or  endorsee  of  a  bill  or  note  who  is  in  posses- 
sion of  it,  or  the  bearer  thereof. 

"Indorsement"  means  an  indorsement  completed  by  delivery. 

"  Issue  "  means  the  first  delivery  of  a  bill  or  note,  completed  in  form,  to  a 
person  who  takes  it  as  a  holder. 

"  Person  "  includes  a  body  of  persons,  whether  incorporated  or  not. 

"Value"  means  valuable  consideration. 

"  Written"  includes  printed,  and  "  writing  "  includes  print. 

[87] 


88  BILLS  OF   EXCHANGE  ACT. 

PART  II. 
Bills  of  Exchange. 
Form  and  Interpretation. 

3.  Bill  of  exchange  defined. 

(1)  A  bill  of  exchange  is  an  unconditional  order  in  writing,  addressed  by  one 
person  to  another,  signed  by  the  person  giving  it,  requiring  the  person  to 
whom  it  is  addressed  to  pay  on  demand  or  at  a  fixed  or  determinable  future 
time,  a  sum  certain  in  money  to  or  to  the  order  of  a  specified  person,  or  to 
bearer. 

(2)  An  instrument  which  does  not  comply  with  these  conditions,  or  which 
orders  any  act  to  be  done  in  addition  to  the  payment  of  money,  is  not  a  bill  of 
exchange. 

(3)  An  order  to  pay  out  of  a  particular  fund  is  not  unconditional  within  the 
meaning  of  this  section  ;  but  an  unqualified  order  to  pay,  coupled  with  (a)  an 
indication  of  a  particular  fund  out  of  which  the  drawee  is  to  reimburse  him- 
self or  a  particular  account  to  be  debited  with  the  amount,  or  (6)  a  statement 
of  the  transaction  whicli  gives  rise  to  the  bill,  is  unconditional. 

(4)  A  bill  is  not  invalid  by  reason  — 

(a)  That  it  is  not  dated; 

(6)  That  it  does  not  specify  the  value  given,  or  that  any  value  has  been 

given  therefor; 
(c)  That  it  does  not  specify  the  place  where  it  is  drawn  or  the  place 

where  it  is  payable. 

4.  Inland  and  foreign  bills. 

(1)  An  inland  bill  is  a  bill  which  is,  or  on  the  face  of  it  purports  to  be  —  (a) 
both  drawn  and  payable  within  the  British  Islands,  or  (6)  drawn  within  the 
British  Islands  upon  some  person  resident  therein.  Any  other  bill  is  a 
foreign  bill. 

For  the  purposes  of  this  act  "  British  Islands"  mean  any  part  of  the  United 
Kingdom  of  Great  Britain  and  Ireland,  the  Islands  of  Man,  Guernsey,  Jersey, 
Alderney,  and  Sark,  and  the  islands  adjacent  to  any  of  them  being  part  of  the 
dominions  of  Her  Majesty. 

(2)  Unless  the  contrary  appear  on  the  face  of  the  bill  the  holder  may  treat  it 
as  an  inland  bill. 

5.  Effeet  where  different  parties  to  bill  are  the  same  person. 

(1)  A  bill  may  be  drawn  payable  to,  or  to  the  order  of,  the  drawer;  or  it  may 
be  drawn  payable  to,  or  to  the  oi'der  of,  the  drawee. 

(2)  Where  in  a  bill  drawer  and  drawee  are  the  same  person,  or  where  the 
drawee  is  a  fictitious  person  or  a  person  not  having  capacity  to  contract,  the 
holder  may  treat  the  instrument,  at  his  option,  either  as  a  bill  of  exchange  or 
as  a  promissory  note. 

6.  Address  to  drawee. 

(1)  The  drawee  must  be  named  or  otherwise  indicated  in  a  bill  with  reason- 
able certainty. 

(2)  A  bill  may  be  addressed  to  two  or  more  drawees  whether  they  are 
partners  or  not,  but  an  order  addressed  to  two  drawees  in  the  alternative,  or 
two  or  more  drawees  in  succession,  is  not  a  bill  of  exchange. 


FORM   AND    INTERPRETATION.  89 

7.  Certainty  required  as  to  payee. 

(1)  Where  a  bill  is  not  payable  to  bearer,  the  payee  must  be  named  or 
otherwise  indicated  therein  with  reasonable  certainty. 

(2)  A  bill  may  be  made  payable  to  two  or  more  payees  jointly,  or  it  may  be 
made  payable  in  the  alternative  to  one  of  two,  or  one  or  some  of  several  payees. 
A  bill  maj"  also  be  made  payable  to  the  holder  of  an  office  for  the  time  being. 

(3)  Where  the  payee  is  a  fictitious  or  non-existing  person,  the  bill  may  be 
treated  as  payable  to  bearer. 

8.  What  bills  are  negotiable. 

(1)  When  a  bill  contains  words  prohibiting  transfer,  or  indicating  an  inten- 
tion that  it  should  not  be  transferable,  it  is  valid  as  between  the  parties 
thereto,  but  is  not  negotiable. 

(3)  A  negotiable  bill  may  be  payable  either  to  order  or  to  bearer. 

(3)  A  bill  is  payable  to  bearer  which  is  expressed  to  be  so  payable,  or  on  which 
the  only  or  last  indorsement  is  an  indorsement  in  blank. 

(4)  A  bill  is  payable  to  order  which  is  expressed  to  be  so  payable,  or  which 
is  expressed  to  be  payable  to  a  particular  person,  and  does  not  contain  words 
prohibiting  transfer  or  indicating  an  intention  that  it  should  not  be 
transferable. 

(5)  Where  a  bill,  either  originally  or  by  indorsement,  is  expressed  to  be  pay- 
able to  the  order  of  a  specified  person,  and  not  to  him  or  his  order,  it  is  never- 
theless payable  to  him  or  his  order  at  his  option. 

9.  Sum  payable. 

(1)  Tlie  sum  payable  by  a  bill  is  a  sum  certain  within  the  meaning  of  this 
act,  although  it  is  required  to  be  paid  — 

(a)  With  interest. 

(5)  By  stated  installments. 

(c)  By  stated  installments,  with  a  provision  that  upon  default  in  pay. 

ment  of  any  installment  the  whole  shall  become  due. 

(d)  According  to  an  indicated  rate  of  exchange,  or  according  to  a  rate 

of  exchange  to  be  ascertained  as  directed  by  the  bill. 

(2)  Where  the  sum  payable  is  expressed  in  words  and  also  in  figures,  and 
there  is  a  discrepancy  between  the  two,  the  sum  denoted  by  the  words  is  the 
amount  payable. 

(3)  Where  a  biU  is  expressed  to  be  payable  with  interest,  unless  the  instru- 
ment otherwise  provides,  interest  runs  from  the  date  of  the  bill,  and  if  the  bill 
is  undated  from  the  issue  thereof. 

10.  Bill  payable  on  demand. 

(1)  A  bill  is  payable  on  demand  — 

(a)  Which  is  expressed  to  be  payable  on  demand,  or  at  sight,  or  on 

presentation  ;  or 

(b)  In  which  no  time  for  payment  is  expressed. 

(2)  Where  a  bill  is  accepted  or  indorsed  when  it  is  overdue,  it  shall,  as  regards 
the  acceptor  who  so  accepts,  or  any  indorser  who  so  indorses  it,  be  deemed  a 
bill  payable  on  demand. 

1 1 .  Bill  payable  at  a  future  time. 

A  bill  is  payable  at  a  determinable  future  time  within  the  meaning  of  this 
act  which  is  expressed  to  be  payable  — 


90  BILLS   OF   EXCHANGE   ACT. 

(1)  At  a  fixed  period  after  date  or  siglit. 

(2)  On  or  at  a  fixed  period  after  the  occurrence  of  a  specified  event  which  is 
certain  to  happen,  though  tlie  time  of  happening  may  be  uncertain. 

An  instrument  expressed  to  be  payable  on  a  contingency  is  not  a  bill,  and 
tl;e  happening  of  the  event  does  not  cure  the  defect. 

1 2.  Omission  of  date  in  bill  payable  after  date. 

Where  a  bill  expressed  to  be  payable  at  a  fixed  period  after  date  is  issued 
undated,  or  where  the  acceptance  of  a  bill  payable  at  a  fixed  period  after  sight 
is  undated,  any  holder  may  insert  therein  the  true  date  of  issue  or  acceptance, 
and  the  bill  shall  be  payable  accordingly. 

Provided  that  (1)  where  the  holder  in  good  faith  and  by  mistake  inserts  a 
wrong  date,  and  (3)  in  every  case  where  a  wrong  date  is  inserted,  if  the  bill 
subsequently  comes  into  the  hands  of  a  holder  in  due  course,  tlie  bill  shall  not 
be  avoided  thereby,  but  shall  operate  and  be  payable  as  if  the  date  so  inserted 
had  been  the  true  date. 

13.  Ante-dating-  and  post-dating. 

(1)  Where  a  bill  or  an  acceptance  or  any  indorsement  on  a  bill  is  dated,  the 
date  shall,  unless  the  contrary  be  proved,  be  deemed  to  be  the  true  date  of  the 
drawing,  acceptance  or  indorsement,  as  the  case  may  be. 

(2)  A  bill  is  not  invalid  by  reason  only  that  it  is  ante-dated  or  post-dated,  or 
that  it  bears  date  on  a  Sunday. 

14.  Computation  of  time  of  payment. 

Where  a  bill  is  not  payable  on  demand,  the  day  on  which  it  falls  due  is 
determined  as  follows  : 

(1)  Tliree  days,  called  days  of  grace,  are,  in  every  case  where  the  biU  itself 
does  not  otherwise  provide,  added  to  the  time  of  payment  as  fixed  by  the 
bill,  anil  the  bill  is  due  and  jjayable  on  the  last  day  of  grace  : 

Provided  that  — 

(a)  When  the  last  day  of  grace  falls  on  Sunday,  Christmas  Day,  Good 
Friday,  or  a  day  appointed  by  Royal  proclamation  as  a  public 
fast  or  thanksgiving  day,  the  bill  is,  except  in  the  case  herein- 
after provided  for,  due  and  payable  on  the  preceding  business 
day; 

(6)  When  the  last  day  of  grace  is  a  bank  holiday  (other  than  Christmas 
day  or  Good  Friday)  under  the  Bank  Holidays  Act,  1871,*  and 
acts  amending  or  extending  it,  or  when  the  last  day  of  grace  is  a 
Sunday  and  the  second  day  of  grace  is  a  bank  holiday,  the  bill  is 
due  and  payable  on  the  succeeding  business  day. 

(2)  Where  a  bill  is  payable  at  a  fixed  period  after  date,  after  sight,  or  after 
the  happening  of  a  specified  event,  the  time  of  payment  is  determined  by 
excluding  the  day  from  which  the  time  is  to  begin  to  run  and  by  including 
the  day  of  payment. 

(.3)  Where  a  bill  is  payable  at  a  fixed  period  after  sight,  the  time  begins  to 
run  from  the  date  of  the  acceptance  if  the  bill  be  accepted,  and  from  the  date 
of  noting  or  protest  if  the  bill  be  noted  or  protested  for  non-acceptance  or 
for  non -delivery. 

(4)  The  term  "  month"  in  a  bill  means  calendar  month. 

*  34  and  35  Vict.  ch.  17. 


FORM   AND   INTERPRETATION.  9I 

15.  Case  of  need. 

The  drawer  of  a  bill  and  any  indorser  may  insert  therein  the  name  of  a  per- 
son to  whom  the  holder  may  resort  in  case  of  need,  that  is  to  say,  in  case  the 
bill  is  dishonored  by  non-acceptance  or  non-payment.  Such  person  is  called 
the  referee  in  case  of  need.  It  is  in  the  option  of  the  holder  to  resort  to  the 
referee  in  case  of  need  or  not  as  he  may  think  fit. 

16.  Optional  stipulations  by  drawer  or  indorser. 

Tile  drawer  of  a  bill,  and  any  indorser,  may  insert  therein  an  express 
stipulation  — 

(1)  Negativing  or  limiting  his  own  liability  to  the  holder  ; 

(2)  Waiving  as  regards  himself  some  or  all  of  the  holder's  duties. 

17.  Definition  and  requisites  of  acceptance. 

(Ij  The  acceptance  of  a  bill  is  the  signification  by  the  drawee  of  his  assent 
to  the  order  of  the  drawer. 

(2)  An  acceptance  is  invalid  unless  it  complies  with  the  following  condi- 
tions, namely  : 

(o)  It  must  be  written  on  the  bill  and  be  signed  by  the  drawee.     The 
mere   signature   of    the   drawee    without    additional    words    is 
suflficient. 
(&)  It  must  not  express  that  the  drawee  will  perform  his  promise  by 
any  other  means  than  the  payment  of  money. 

18.  Time  for  acceptance. 

A  bill  may  be  accepted  — 

(1)  Before  it  has,  been  signed  by  the  drawer,  or  while  otherwise  incomplete : 

(2)  When  it  is  overdue,  or  after  it  has  been  dishonored  by  a  previous  refusal 
to  accept,  or  by  non-payment : 

(3)  When  a  bill  payable  after  sight  is  dishonored  by  non-acceptance,  and  the 
drawee  subsequently  accepts  it,  the  holder,  in  the  absence  of  any  different 
agreement,  is  entitled  to  have  the  bill  accepted  as  of  the  date  of  first  present- 
ment to  the  drawee  for  acceptance. 

19.  General  and  qualified  acceptances. 

(1)  An  acceptance  is  either  (a)  general  or  (&)  qualified. 

(2)  A  general  acceptance  assents  without  qualification  to  the  order  of  the 
drawer.  A  qualified  acceptance  in  express  terms  varies  the  effect  of  the  bill 
as  drawn. 

In  particular  an  acceptance  is  qualified  which  is  — 

(a)  Conditional,  that  is  to  say,  which  makes  payment  by  the  acceptor 

dependent  on  the  fulfillment  of  a  condition  therein  stated  : 
(6)  Partial,   that   is  to  say,  an    acceptance  to  pay  part  only  of  the 

amount  for  which  the  bill  is  drawn: 

(c)  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a  particular 

specified  place  : 
An  acceptance  to  pay  at  a  particular  place  is  a  general  acceptance, 
unless  it  expressly  states  that  the  bill  is  to  be  paid  there  only  and 
not  elsewhere  : 

(d)  Qualified  as  to  time  : 

(e)  The  acceptance  of  some  one  or  more  of  the  drawees,  but  not  of  all 


92  BILLS   OF   EXCHANGE   ACT. 

20.  Inchoate  instruments. 

(1)  Where  a  simple  signature  on  a  blank  stamped  paper  is  delivered  by  the 
signer  in  order  that  it  may  be  converted  into  a  bill,  it  opei'ates  as  a  prima 
facie  authority  to  fill  it  up  as  a  complete  bill  for  any  amount  the  stamp  will 
cover,  using  the  signature  for  that  of  the  drawer,  or  the  acceptor,  or  an 
indorser  ;  and,  in  like  manner,  when  a  bill  is  wanting  in  any  material  particu- 
lar, the  person  in  possession  of  it  has  a  prima  facie  authority  to  fill  up  the 
omission  in  any  way  he  thinks  fit. 

(3)  In  order  that  any  such  instrument  when  completed  may  be  enforceable 
against  any  person  who  became  a  party  thereto  prior  to  its  completion,  it 
must  be  filled  up  within  a  reasonable  time,  and  strictly  in  accordance  with 
the  authority  given. 

Reasonable  time  for  this  purpose  is  a  question  of  fact. 

Provided  that  if  any  such  instrument  after  completion  is  negotiated  to  a 
holder  in  due  course,  it  shall  be  valid  and  effectual  for  all  purposes  in  his 
hands,  and  he  may  enforce  it  as  if  it  had  been  filled  up  within  a  reasonable 
time  and  strictly  in  accordance  with  the  authority  given. 

21.  Delivery. 

(1)  Every  contract  on  a  bill,  whether  it  be  the  drawer's,  the  acceptor's,  or 
an  indorser's,  is  incomplete  and  revocable,  until  delivery  of  the  instrument  in 
order  to  give  effect  thereto, 

Provided  that  where  an  acceptance  is  written  on  a  bill,  and  the  drawee  gives 
notice  to  or  according  to  the  directions  of  the  person  entitled  to  the  bill  that 
he  has  accepted  it,  the  acceptance  then  becomes  complete  and  in-evocable. 

(2)  As  between  immediate  parties,  and  as  regards  a  remote  party  other  than 
a  holder  in  due  course,  the  delivery  — 

(a)  In  order  to  be  effectual  must  be  made  either   by   or  under  the 
authority  of  the  party  drawing,  accepting,  or  indorsing,  as  the 
case  may  be : 
(6)  May  be  shown  to  have  been  conditional  or  for  a  special   purpose 
only,  and  not  for  the  purpose  of  transferring  the  property  in  the 
bill. 
But  if  the  bill  be  in  the  hands  of  a  holder  in  due  course  a  valid  delivery  of 
the  bill  by  all  parties  prior  to  him  so  as  to  make  them  liable  to  him  is  con- 
clusively presumed. 

(3)  Where  a  bill  is  no  longer  in  tlie  possession  of  a  party  who  has  signed  it  as 
drawer,  acceptor,  or  indorser,  a  valid  and  unconditional  delivery  by  him  is 
presumed  until  the  contrary  is  proved. 

Capacity  and  Authority  of  Parties. 

22.  Capacity  of  parties. 

(1)  Capacity  to  incvir  liability  as  a  party  to  a  bill  is  co-extensive  with  capacity 
to  contract. 

Provided  that  nothing  in  this  section  shall  enable  a  corporation  to  make 
itself  liable  as  drawer,  acceptor,  or  indorser  of  a  bill  unless  it  is  competent  to 
it  so  to  do  under  the  law  for  the  time  being  in  force  relating  to  corporations. 

(2)  Where  a  bill  is  drawn  or  indorsed  by  an  infant,  minor,  or  corporation 
having  no  capacity  or  power  to  incur  liaHlitv  on  a  lull,  the  drawing  or  indorse- 


THE    CONSIDERATION   FOR   A   BILL.  93 

ment  entitles  the  holder  to  receive   payment  of  the  bill,  and   to  enforce  it 
against  any  other  party  thereto. 

23.  Signature  essential  to  liability. 

No  person  is  liable  as  drawer,  indorser,  or  acceptor  of  a  bill  who  has  not 
signed  it  as  such  : 
Provided  that  — 

(1)  Where  a  person  signs  a  bill  in  a  trade  or  assumed  name,  he  is  liable 
thereon  as  if  he  had  signed  it  in  his  own  name; 

(2)  The  signature  of  the  name  of  a  firm  is  equivalent  to  the  signature  by 
the  person  so  signing  of  the  names  of  all  persons  liable  as  partners  in  that  firm. 

24.  Forged  op  unauthorized  signature. 

Subject  to  the  provisions  of  this  Act,  where  a  signature  on  a  bill  is  forged  or 
placed  thereon  without  the  authority  of  the  person  whose  signature  it  purjjorts 
to  be,  the  forged  or  unauthorized  signature  is  wholly  inoperative,  and  no  right 
to  retain  the  bill,  or  to  give  a  discharge  therefor,  or  to  enforce  payment  thereof 
against  any  party  thereto,  can  be  acquired  thi-ough  or  under  that  signature, 
unless  the  party  against  whom  it  is  sought  to  retain  or  enforce  payment  of  the 
bill  is  precluded  from  setting  up  the  forgery  or  want  of  authority. 

Provided  that  nothing  in  this  section  shall  effect  the  ratification  of  an 
unauthorized  signature  not  amounting  to  a  forgery. 

25.  Procuration  signatures. 

A  signature  by  procuration  operates  as  notice  that  the  agent  has  but  a  limited 
authority  to  sign,  and  the  principal  is  only  bound  by  such  signature  if  the 
agent  in  so  signing  was  acting  within  the  actual  limits  of  his  authority. 

26.  Person  signing  as  agent  or  in  representative  capacity. 

(1)  Where  a  person  signs  a  bill  as  drawer,  indorser,  or  acceptor,  and  adds 
words  to  his  signature  indicating  that  he  signs  for  or  on  behalf  of  a  principal, 
or  in  a  representative  character,  he  is  not  personally  liable  thereon  ;  but  the 
mere  addition  to  his  signature  of  words  describing  him  as  an  agent,  or  as  fill- 
ing a  representative  character,  does  not  exempt  him  from  personal  liability. 

(2)  In  determining  whether  a  signature  on  a  bill  is  that  of  the  principal  or 
that  of  the  agent  by  whose  hand  it  is  written,  the  construction  most  favorable 
to  the  validity  of  the  instrument  shall  be  adopted. 

Tlie  Consideration  for  a  Bill. 

27.  Value  and  holder  for  value. 

(1)  Valuable  consideration  for  a  bill  may  be  constituted  by,  — 

(a)   Any  consideration  sviffioient  to  support  a  simple  contract; 

(&)  An  antecedent  debt  or  liability.     Such  a  debt  or  liability  is  deemed 

valuable  consideration  whether  the  bill  is  payable  on  demand  or 

at  a  future  time. 

(2)  Where  value  has  at  any  time  been  given  for  a  bill  the  holder  is  deemed 
to  be  a  holder  for  value  as  regards  the  acceptor  and  all  parties  to  the  bill  who 
became  parties  prior  to  such  time. 

(3)  Where  the  holder  of  a  bill  has  alien  on  it  arising  either  from  contract  or 
by  implication  of  law,  he  is  deemed  to  be  a  holder  for  value  to  the  extent  of 
the  sum  for  which  he  has  a  lien. 


94  BILLS    OF   EXCHANGE   ACT. 

28.  Aeeommodation  bill  or  party. 

(1)  An  accommodation  party  to  a  bill  is  a  person  who  has  signed  a  bill  as 
drawer,  acceptor,  or  indorser,  without  receiving  value  therefor,  and  for  the 
purpose  of  lending  his  name  to  some  other  person. 

(2)  An  accommodation  party  is  liable  on  the  bill  to  a  holder  for  value;  and 
it  is  immaterial  whether,  when  such  holder  took  the  bill,  he  knew  such  party 
to  be  an  accommodation  party  or  not. 

29.  Holder  in  due  course. 

(1)  A  liolder  in  due  course  is  a  holder  who  has  taken  a  bill,  complete  and 
regular  on  the  face  of  it,  under  the  following  conditions;  namely, 

(a)  That  he  became  the  holder  of  it  before  it  was  overdue,  and  with- 
out notice  that  it  had  been  previously  dishonored,  if  such  was 
the  fact: 

(6)  That  he  took  the  bill  in  good  faith  and  for  value,  and  that  at  the 
time  the  bill  was  negotiated  to  him  he  had  no  notice  of  any 
defect  in  the  title  of  the  person  who  negotiated  it. 

(2)  In  particular  the  title  of  a  person  who  negotiates  a  bill  is  defective  within 
the  meaning  of  this  Act  when  he  obtained  the  bill,  or  the  acceptance  thereof, 
by  fraud,  duress,  or  force  and  fear,  or  other  unlawful  means,  or  for  an  illegal 
consideration,  or  when  he  negotiates  it  in  breach  of  faith,  or  under  such  cir- 
cumstances as  amount  to  a  fraud. 

(3)  A  holder  (whether  for  value  or  not),  who  derives  his  title  to  a  bill 
through  a  holder  in  due  course,  and  who  is  not  himself  a  party  to  any  fraud 
or  illegality  affecting  it,  has  all  the  rights  of  that  holder  in  due  course  as 
regards  the  acceptor  and  all  parties  to  the  bill  prior  to  that  holder. 

30.  Presumption  of  value  and  good  faith. 

(1)  Every  party  whose  signature  appears  on  a  bill  is  prima  facie  deemed  to 
have  become  a  party  thereto  for  value. 

(2)  Every  holder  of  a  bill  is  prima  facie  deemed  to  be  a  holder  in  due 
coui'se  ;  but  if  in  an  action  on  a  bill  it  is  admitted  or  proved  that  the  accep- 
tance, issue,  or  subsequent  negotiation  of  the  bill,  is  aflfected  with  fraud, 
duress,  or  force  and  fear,  or  illegality,  the  burden  of  proof  is  shifted,  unless 
and  until  the  holder  proves  that,  subsequent  to  the  alleged  fraud  or  illegality, 
value  has  in  good  faith  been  given  for  the  bill. 

Negotiation  of  Bills. 

31.  Negotiation  of  bill. 

(1)  A  bill  is  negotiated  when  it  is  transferred  from  one  person  to  another  in 
such  a  manner  as  to  constitute  the  transferee  the  holder  of  the  bill. 

(2)  A  biU  payable  to  bearer  is  negotiated  by  delivery. 

(3)  A  bill  payable  to  order  is  negotiated  by  the  indorsement  of  the  holder 
completed  by  delivery. 

(4)  Where  the  holder  of  a  bill  payable  to  his  order  transfers  it  for  value 
without  indorsing  it,  the  transfer  gives  the  transferee  such  title  as  the  trans, 
feror  had  in  the  bill,  and  the  transferee  in  addition  acquires  the  right  to  have 
the  indorsement  of  the  transferor. 

(5)  Where  any  person  is  under  obligation  to  indorse  a  bill  in  a  representa- 
tive capacity,  he  may  indorse  the  bill  in  such  terms  as  to  negative  personal 
liability. 


NEGOTIATION   OF   BILLS.  95 

32.  Requisites  of  a  valid  indorsement. 

An  indorsement  in  order  to  operate  as  a  negotiation  must  comply  with  the 
following  conditions,  namely, — 

U)  It  must  be  written  on  the  bill  itself  and  be  signed  by  the  indorser.  The 
simple  signature  of  the  indorser  on  the  bill,  without  additional  words,  is 
sufficient. 

An  indorsement  written  on  an  allonge,  or  on  a  "  copy"  of  a  bill  issued  or 
negotiated  in  a  country  where  "  copies"  are  recognized,  is  deemed  to  be  writ- 
ten on  the  bill  itself. 

.  (2)  It  must  be  an  indorsement  of  tlie  entire  bill.  A  partial  indorsement, 
that  is  to  say,  an  indorsement  which  purports  to  transfer  to  the  indorsee  a 
part  only  of  the  amount  payable,  or  which  purports  to  transfer  the  bill  to  two 
or  more  indorsees  severally,  does  not  operate  as  a  negotiation  of  the  bill. 

(3)  Where  a  bill  is  payable  to  the  order  of  two  or  more  payees  or  indorsees 
who  are  not  partners  aU  must  indorse,  unless  the  one  indorsing  has  authority 
to  indorse  for  the  others. 

(4)  Where,  in  a  biU  payable  to  order,  the  payee  or  indorsee  is  wrongly  desig- 
nated, or  his  name  is  misspelt,  he  may  indorse  the  bill  as  therein  described 
adding,  if  he  thinks  fit,  his  proper  signature. 

(5)  Where  there  are  two  or  more  indorsements  on  a  bill,  each  indorsement 
is  deemed  to  have  been  made  in  the  order  in  which  it  appears  on  the  bill,  until 
the  contrary  is  proved. 

(6)  An  indorsement  may  be  made  in  blank  or  special.  It  may  also  contain 
terms  making  it  restrictive. 

33.  Conditional  indorsement. 

Where  a  bill  purports  to  be  indorsed  conditionally,  the  condition  may  be 
disregarded  bj'  the  payer,  and  payment  to  the  indorsee  is  valid  whether  the 
condition  has  bepn  fulfilled  or  not. 

34.  Indorsement  in  blank  and  special  indorsement. 

(1)  An  indorsement  in  blank  specifies  no  indorsee,  and  a  bill  so  indorsed 
becomes  payable  to  bearer. 

(2)  A  special  indorsement  specifies  the  person  to  whom,  or  to  whose  order, 
the  bill  is  to  be  payable. 

(3)  The  provisions  of  this  Act  relating  to  a  payee  apply  with  the  necessary 
modifications  to  an  indorsee  under  a  special  indorsement. 

(4)  When  a  bill  has  been  indorsed  in  blank,  any  holder  may  convert  the 
blank  indorsement  into  a  special  indorsement  by  writing  above  the  indorser's 
signature  a  direction  to  pay  the  bill  to  or  to  the  order  of  himself  or  some  other 
person. 

35.  Restrictive  indorsement. 

(1)  An  indorsement  is  restrictive  which  prohibits  the  further  negotiation  of 
the  bill,  or  which  expresses  that  it  is  a  mere  authority  to  deal  with  the  bill  as 
thereby  directed,  and  not  a  transfer  of  the  ownership  thereof,  as,  for  example, 
if  a  bill  be  indorsed  "Pay  D.  only,"  or  "  Pay  D.  for  the  account  of  X.,"  or 
"  Pay  D.  or  order  for  collection." 

(2)  A  restrictive  indorsement  gives  the  indorsee  the  right  to  receive  pay- 
ment of  the  bill  and  to  sue  any  party  thereto  that  his  indorser  could  have 


^6  BILLS   OF   EXCHANGE  ACT. 

sued,  but  gives  him  no  power   to  transfer  his  rights  as  indorsee  unless  it 
expressly  authorize  him  to  do  so. 

(3)  Where  a  restrictive  indorsement  authorizes  further  transfer,  all  subse- 
quent indorsees  take  the  bill  with  the  same  rights  and  subject  to  the  same 
liabilities  as  the  first  indorsee  under  the  restrictive  indorsement. 

36.  Negotiation  of  overdue  or  dishonoured  bill. 

(1)  Where  a  bill  is  negotiable  in  its  origin  it  continues  to  be  negotiable  until 
it  has  been  (a)  restrictively  indorsed  or  (6)  discharged  by  payment  or  otherwise. 

(2)  Where  an  overdue  bill  is  negotiated,  it  can  only  be  negotiated  subject  to 
any  defect  of  title  affecting  it  at  its  maturity,  and  thenceforward  no  person 
who  takes  it  can  acquire  or  give  a  better  title  than  that  which  the  person  from 
whom  he  took  it  had. 

(3)  A  bill  payable  on  demand  is  deemed  to  be  overdue  within  the  meaning 
and  for  the  purposes  of  this  section,  when  it  appears  on  the  face  of  it  to  have 
been  in  circulation  for  an  unreasonable  length  of  time.  What  is  an  unreason- 
able length  of  time  for  this  purpose  is  a  question  of  fact. 

(4)  Except  where  an  indorsement  bears  date  after  the  maturity  of  the  bill, 
every  negotiation  is  prima  facie  deemed  to  have  been  effected  before  the  bill 
was  overdue. 

(5)  Where  a  bill  which  is  not  overdue  has  been  dishonoured  any  person  who 
takes  it  with  notice  of  the  dishonour  takes  it  subject  to  any  defect  of  title 
attaching  thereto  at  the  time  of  dishonour,  but  nothing  in  this  sub-section 
shall  affect  the  rights  of  a  holder  in  due  course. 

37.  Negotiation  of  bill  to  party  already  liable  thereon. 

Wliere  a  bill  is  negotiated  back  to  the  drawer,  or  to  a  prior  indorser,  or  to 
the  acceptor,  such  party  may,  subject  to  the  provisions  of  this  Act,  re-issue 
and  further  negotiate  the  bill,  but  he  is  not  entitled  to  enforce  payment  of  the 
bill  against  any  intervening  party  to  whom  he  was  previously  liable. 

38.  Rights  of  the  holder. 

The  rights  and  powers  of  the  holder  of  a  bill  are  as  follows: 

(1)  He  may  sue  on  the  bill  in  his  own  name  : 

(2)  Where  he  is  a  holder  in  due  course,  he  holds  the  bill  free  from  any  defect 
of  title  of  prior  parties,  as  well  as  from  mere  personal  defences  available  to 
prior  parties  among  themselves,  and  may  enforce  payment  against  all  parties 
liable  on  the  bill: 

(3)  Where  his  title  is  defective  (a)  if  he  negotiates  the  bill  to  a  holder  in  due 
course,  that  holder  obtains  a  good  and  complete  title  to  the  bill,  and  (6)  if  he 
obtains  payment  of  the  bill  the  person  who  pays  him  in  due  course  gets  a  valid 
discharge  for  the  bill. 

General  Dvties  of  the  Holder. 

39.  When  presentment  for  acceptance  is  necessary. 

(1)  Where  a  bill  is  payable  after  sight,  presentment  for  acceptance  is  neces- 
sary in  order  to  fix  the  maturity  of  the  instrument. 

(2)  Where  a  bill  expressly  stipulates  that  it  shall  be  presented  for  accept- 
ance, or  where  a  bill  is  drawn  payable  elsewhere  than  at  the  residence  or  place 
of  business  of  the  drawee,  it  must  be  presented  for  acceptance  before  it  can  be 
presented  for  payment. 


GENERAL  DUTIES  OF  THE  HOLDER.  97 

(3)  In  no  other  case  is  presentment  for  acceptance  necessary  in  order  to 
render  liable  any  party  to  the  bill. 

(4)  Where  the  holder  of  a  bill,  drawn  payable  elsewhere  than  at  the  place 
of  business  or  residence  of  the  drawee,  has  not  time,  with  the  exercise  of 
reasonable  diligence,  to  present  the  bill  for  acceptance  before  f)resenting  it  for 
payment  on  the  day  that  it  falls  due,  the  delay  caused  by  presenting  the  bill 
for  acceptance  before  presenting  it  for  payment  is  excused,  and  does  not  dis- 
charge the  drawer  and  indorsers. 

40.  Time  for  presenting  bill  payable  after  sight. 

(1)  Subject  to  the  provisions  of  this  Act,  when  a  bill  payable  after  sight  is 
negotiated,  the  holder  must  either  present  it  for  acceptance  or  negotiate  it 
within  a  reasonable  time. 

(2)  If  he  do  not  do  so,  the  drawer  and  all  indorsers  prior  to  that  holder  are 
discharged. 

(3)  In  determining  what  is  a  reasonable  time  within  the  meaning  of  this 
section,  regard  shall  be  had  to  the  nature  of  the  bill,  the  usage  of  trade  with 
respect  to  similar  bills,  and  the  facts  of  the  particular  case. 

41.  Rules  as  to  presentment  for  acceptance,  and  excuses  for  non-pre- 

sentment. 

(1)  A  bill  is  duly  presented  for  acceptance  which  is  presented  in  accordance 
with  the  following  rules: 

(a)  The  presentment  must  be  made  by  or  on  behalf  of  the  holder  to 

the  drawee,  or  to  some  person  authorized  to  accept  or  refuse 
acceptance  on  his  behalf,  at  a  reasonable  hour  on  a  business  day 
and  before  the  bill  is  overdue  : 

(b)  Where  a  bill  is  addressed  to  two  or  more  drawees,  who  are  not 

partners,  presentment  must  be  made  to  them  all,  unless  one  has 
authority  to  accept  for  all,  then  presentment  may  be  made  to 
him  only  : 

(c)  Where  the  drawee  is  dead,  presentment  maybe  made  to  his  personal 

representative  : 

(d)  Where  the  drawee  is  bankrupt,  presentment  may  be  made  to  him 

or  his  trustee : 

(e)  Where  authorized  by  agreement  or  usage,  a  presentment  through 

the  post  office  is  sufficient. 

(2)  Presentment  in  accordance  with  these  rules  is  excused,  and  a  bill  may  be 
treated  as  dishonoured  by  non-acceptance — 

(a)  Where  the  drawee  is  dead  or  bankrupt,  or  is  a  fictitious  person  or  a 

person  not  having  cai:)acity  to  contract  by  bill : 

(b)  Where,  after  the  exercise  of  reasonable  diligence,  such  presentment 

cannot  be  effected  : 

(c)  Where,  although  the  presentment  has  been  irregular,  acceptance 

has  been  refused  on  some  other  ground. 

(3)  The  fact  that  the  holder  has  reason  to  believe  that  the  bill,  on  present- 
ment, will  be  dishonoured  does  not  excuse  presentment. 

42.  Non-acceptance. 

(1)  When  a  bill  is  duly  presented  for  acceptance  and  is  not  accepted  within 

NEGOT.  INSTRUMENTS  —  7 


98  BILLS   OF   EXCHANGE   ACT. 

the  customary  time,  the  person  presenting  it  must  treat  it  as  dishonoured  by 
non-acceptance.  If  he  do  not,  the  holder  shall  lose  his  right  of  recourse 
against  the  drawer  and  indorsers. 

43.  Dishonour  by  non-acceptance  and  its  consequences. 

(1)  A  bill  is  dishonoured  by  non-acceptance — 

(a)  When  it  is  duly  presented  for  acceptance,  and  such  an  acceptance 
as  is  prescribed  by  this  act  is  refused  or  cannot  be  obtained  ;  or 

(6)  When  presentment  for  acceptance  is  excused  and  the  bill  is  not 
accepted. 

(2)  Subject  to  the  provisions  of  this  Act,  when  a  bill  is  dishonoured  by  non 
acceptance,  an  immediate  right  of  recourse  against  the  drawer  and  indorsers 
accrues  to  the  holder,  and  no  presentment  for  payment  is  necessary. 

44.  Duties  as  to  qualified  acceptances. 

(1)  The  holder  of  a  bill  may  refuse  to  take  a  qualified  acceptance,  and  if  he 
does  not  obtain  an  unqualified  acceptance  may  treat  the  bill  as  dishonoured  by 
non-acceptance. 

(2)  Where  a  qualified  acceptance  is  taken,  and  the  drawer  or  an  indorser  has 
not  expressly  or  impliedly  authorized  the  holder  to  take  a  qualified  acceptance, 
or  does  not  subsequently  assent  thereto,  such  drawer  or  indorser  is  discharged 
from  his  liability  on  the  bill. 

The  provisions  of  this  sub-section  do  not  apply  to  a  partial  acceptance, 
whereof  due  notice  has  been  given.  Where  a  foreign  bill  has  been  accepted 
as  to  part,  it  must  be  protested  as  to  the  balance. 

(3)  When  the  drawer  or  indorser  of  a  bill  receives  notice  of  a  qualified 
acceptance,  and  does  not  within  a  reasonable  time  express  his  dissent  to  the 
holder,  he  shall  be  deemed  to  have  assented  thereto. 

45.  Rules  as  to  ppssentment  for  payment. 

Subject  to  the  provisions  of  this  Act,  a  bill  must  be  duly  presented  for 
payment.  If  it  be  not  so  presented  the  drawer  and  endorsers  shall  be 
discharged. 

A  bill  is  duly  presented  for  payment  which  is  presented  in  accordance  with 
the  following  rules:  — 

(1)  Where  the  bill  is  not  payable  on  demand,  presentment  must  be  made  on 
the  day  it  falls  due. 

(2)  Where  the  bill  is  payable  on  demand,  then,  subject  to  the  provisions  of 
this  Act,  presentment  must  be  made  within  a  reasonable  time  after  its  issue  in 
order  to  render  the  drawer  liable,  and  within  a  reasonable  time  after  its 
indorsement,  in  order  to  render  the  indorser  liable. 

In  determining  what  is  a  reasonable  time,  regard  shall  be  had  to  tlie  nature 
of  the  bill,  the  usage  of  trade  with  regard  to  similar  bills,  and  the  facts  of  the 
particular  case. 

(3)  Presentment  must  be  made  by  the  holder  or  by  some  person  authorized 
to  receive  payment  on  his  behalf  at  a  reasonable  hour  on  a  business  day,  at  the 
proper  place  as  hereinafter  defined,  either  to  the  person  designated  by  the  bill 
as  payer,  or  to  some  person  authorized  to  pay  or  refuse  payment  on  his  behalf 
if  with  the  exercise  of  reasonable  diligence  such  person  can  there  be  found. 


GENERAL  DUTIES  OF  THE  HOLDER  99 

(4)  A  bill  IS  presented  at  the  proper  place  :  — 

(a)  Where  a  place  of  payment  is  specified  in  the  bill  and  the  bUl  is 
there  presented. 

(&)  Where  no  place  of  payment  is  specified,  but  the  address  of  the 
drawee  or  acceptor  is  given  in  the  bill,  and  the  bill  is  there  pre- 
sented. 

(c)  Where  no  place  of  payment  is  specified  and  no  address  given,  and 

the  bill  is  presented  at  the  drawee's  or  acceptor's  place  of  busi- 
ness if  known,  and  if  not,  at  his  ordinary  residence   if  known. 

(d)  In  any  other  case  if  presented  to  the  drawee  or  acceptor  wherever 

he  can  be  found,  or  if  presented  at  his  last  known  place  of  busi- 
ness or  residence. 

(5)  Where  a  bill  is  presented  at  the  proper  place,  and  after  the  exercise  of 
reasonable  diligence  no  person  authorized  to  pay  or  refuse  payment  can  be 
found  there,  no  further  presentment  to  the  drawee  or  acceptor  is  required. 

(6)  Where  a  bill  is  drawn  upon,  or  accepted  by,  two  or  more  persons  who 
are  not  partners,  and  no  place  of  payment  is  specified,  presentment  must  be 
made  to  them  all. 

(7)  Where  the  drawee  or  acceptor  of  a  bill  is  dead,  and  no  place  of  payment 
is  specified,  presentment  must  be  made  to  a  personal  representative,  if  such 
there  be,  and  with  the  exercise  of  reasonable  diligence  he  can  be  found. 

(8)  Where  authorized  by  agreement  or  usage  a  presentment  through  the 
post-office  is  sufficient. 

46.  Excuses  for  delay  or  non-presentment  for  payment. 

(1)  Delay  in  making  presentment  for  payment  is  excused  when  the  delay  is 
caused  by  circumstances  beyond  the  control  of  the  holder,  and  not  imputable 
to  his  default,  misconduct,  or  negligence.  When  the  cause  of  delay  ceases  to 
operate  presentment  must  be  made  with  reasonable  diligence. 

(2)  Presentment  for  payment  is  dispensed  with,  — 

(a)  Where,  after  the  exercise  of  reasonable  diUgence,  presentments  as 
required  by  this  Act,  cannot  be  effected. 
The  fact  that  the  holder  has  reason  to  believe  that  the  bill  will,  on  pre- 
sentment, be  dishonoured,   does  not  dispense  with  the  necessity  for 
presentment. 
(6)  Where  the  drawee  is  a  fictitious  person. 

(c)  As  regards  the  drawer  where  the  drawee  or  acceptor  is  not  bound, 

as  between  himself  and  the  drawer,  to  accept  or  pay  the  bill,  and 
the  drawer  has  no  reason  to  believe  that  the  bill  would  be  paid  if 
presented. 

(d)  As  regards  an  indorser,  where  the  bill  was  accepted  or  made  for  the 

accommodation  of  that  indorser,  and  he  has  no  reason  to  expect 
that  the  bill  would  be  paid  if  presented. 

(e)  By  waiver  of  presentment,  express  or  implied. 

47.  Dishonour  by  non-payment. 

(1)  A  bill  is  dishonoured  by  non-payment  (a)  when  it  is  duly  presented  for 
payment  and  payment  is  refused  or  cannot  be  obtained,  or  (&)  when  present- 
ment is  excused  and  the  bill  is  overdue  and  unpaid. 

(2)  Subject  to  the  provisions  of  this  Act,  when  a  bill  is  dishonoured  by  non- 


lOO  BILLS   OF   EXCHANGE   ACT. 

payment,  an  immediate  right  of  recourse  against  the  drawer  and  indorsers 
accrues  to  the  holder. 

48.  Notice  of  dishonour  and  effect  of  non-notice. 

Subject  to  the  provisions  of  tliis  Act,  wlien  a  bill  has  been  dishonoured  by 
non-acceptance  or  by  non-payment  notice  of  dishonour  must  be  given  to  the 
drawer  and  each  indorser,  and  any  drawer  or  indorser  to  whom  such  notice  is 
not  given  is  discharged  ; 

Provided  that  — 

(1)  Where  a  bill  is  dishonoured  by  non-acceptance,  and  notice  of  dishonour 
is  not  given,  the  rights  of  a  holder  in  due  course  subsequent  to  the  omission, 
shall  not  be  prejudiced  by  the  omission. 

(2)  Where  a  bill  is  dishonoured  by  non-acceptance,  and  due  notice  of  dis- 
honor is  given,  it  shall  not  be  necessary  to  give  notice  of  a  subsequent  dis- 
honour by  non-payment  unless  the  bill  shall  in  the  meantime  have  been 
accepted. 

49.  Rules  as  to  notice  of  dishonour. 

Notice  of  dishonour  in  order  to  be  vaUd  and  effectual  must  be  given  in 
accordance  with  the  following  rules  :  — 

(1)  The  notice  must  be  given  by  or  on  behalf  of  the  holder,  or  by  or  on  be- 
half of  an  indorser  who,  at  the  time  of  giving  it,  is  himself  liable  on  the  bill. 

(2)  Notice  of  dishonour  may  be  given  by  an  agent  either  in  his  own  name,  or 
in  the  name  of  any  party  entitled  to  give  notice  whether  that  party  be  his 
principal  or  not. 

(3)  Where  the  notice  is  given  by  or  on  behalf  of  the  holder,  it  enures  for 
the  benefit  of  all  subsequent  holders  and  all  prior  indorsers  who  have  a  right 
of  recourse  against  the  party  to  whom  it  is  given. 

(4)  Where  notice  is  given  by  or  on  behalf  of  an  indorser  entitled  to  give 
notice  as  hereinbefore  provided,  it  enures  for  the  benefit  of  the  holder  and  all 
indorsers  subsequent  to  the  party  to  whom  notice  is  given. 

(5)  The  notice  may  be  given  in  writing  or  by  personal  communication,  and 
may  be  given  in  any  terms  which  sufficiently  identify  the  bill,  and  intimate 
that  the  bill  has  been  dishonoured  by  non-acceptance  or  non-payment. 

(6)  The  return  of  a  dishonoured  bill  to  the  drawer  or  an  indorser  is,  in  point 
of  form,  deemed  a  sufficient  notice  of  dishonour. 

(7)  A  written  notice  need  not  be  signed,  and  an  insufficient  written  notice 
may  be  supplemented  and  validated  by  verbal  communication.  A  mis- 
description of  the  bill  shall  not  vitiate  the  notice  unless  the  party  to  whom  the 
notice  is  given  is  in  fact  misled  thereby. 

(8)  Where  notice  of  dishonour  is  required  to  be  given  to  any  person,  it  may 
be  given  either  to  the  party  himself,  or  to  liis  agent  in  that  behalf. 

(9)  Where  the  drawer  or  indorser  is  dead,  and  the  party  giving  notice  knows 
it,  the  notice  must  be  given  to  a  personal  representative,  if  such  there  be,  and 
with  the  exercise  of  reasonable  diligence  he  can  be  found. 

(10)  Where  the  drawer  or  indorser  is  bankrupt,  notice  may  be  given  either 
to  the  party  himself  or  to  the  trustee. 

(11)  Where  there  are  two  or  more  drawers  or  indorsers  who  are  not  partners 
notice  must  be  given  to  each  of  theui,  unless  one  of  them  has  authority  to 
receive  such  notice  for  the  others. 


GENERAL   DUTIES   OF   THE   HOLDER.  lOI 

(12)  The  notice  may  be  given  as  soon  as  the  bill  is  dishonoured,  and  must 
be  given  within  a  reasonable  time  thereafter. 

In  the  absence  of  special  circumstances  notice  is  not  deemed  to  have  been 
given  within  a  reasonable  time,  unless  — 

(a)  Where  the  person  giving  and  the  person  to  receive  notice  reside  in 

the  same  place,  the  notice  is  given  or  sent  off  in  time  to  reach 
the  latter  on  the  day  after  the  dishonour  of  the  bill. 

(b)  Where  the  person  giving  and  the  person  to  receive  notice  reside  in 

different  places,  the  notice  is  sent  off  on  the  day  after  the  dis- 
honour of  the  bill,  if  there  be  a  post  at  a  convenient  hour  on  that 
day,  and  if  there  be  no  such  post  on  that  day  then  by  the  next 
post  thereafter. 

(13)  Where  a  bill  when  dishonoured  is  in  the  hands  of  an  agent,  he  may  either 
himself  give  notice  to  the  parties  liable  on  the  bill,  or  he  may  give  notice  to 
his  principal.  If  he  give  notice  to  his  principal,  he  must  do  so  within  the 
same  time  as  if  he  were  the  holder,  and  the  principal  upon  receipt  of  such 
notice  has  himself  the  same  time  for  giving  notice  as  if  the  agent  had  been  an 
independent  holder. 

(14)  Where  a  party  to  a  bill  receives  due  notice  of  dishonour,  he  has  after  the 
receipt  of  such  notice  the  same  period  of  time  for  giving  notice  to  antecedent 
parties  that  the  holder  has  after  the  dishonour. 

(15)  Where  a  notice  of  dishonour  is  duly  addressed  and  posted,  the  sender  is 
deemed  to  have  given  due  notice  of  dishonour,  notwithstanding  any  miscar- 
riage by  the  post-office. 

60.  Excuses  for  non-notice  and  delay. 

(1)  Delay  in  giving  notice  of  dishonour  is  excused  where  the  delay  is  caused 
by  circumstances  beyond  the   control  of   the   party  giving  notice,  and   not 
imputable  to  his  default,  misconduct,  or  negligence.      When   the  cause  of 
delay  ceases  to  operate  the  notice  must  be  given  with  reasonable  diligence. 
(3)  Notice  of  dishonour  is  dispensed  with  — 

(a)  When,  after  the  exercise  of  reasonable  diligence,  notice  as  required 
by  this  act  cannot  be  given  to  or  does  not  reach  the  drawer  or 
indorser  sought  to  be  charged  : 
(&)  By  waiver,  express  or  implied.  Notice  of  dishonour  may  be  waived 
befoi-e  the  time  of  giving  notice  has  arrived,  or  after  the  omission 
to  give  due  notice  : 

(c)  As  regards  the  drawer  in  the   following  cases,  namely,  (1)  where 

drawer  and  draAvee  are  the  same  person,  (3)  where  the  drawee  is 
a  fictitious  person  or  a  person  not  having  capacity  to  contract, 
(8)  where  the  drawer  is  the  person  to  whom  the  bill  is  presented 
for  payment,  (4)  where  the  drawee  or  acceptor  is  as  between  him- 
self and  the  drawer  under  no  obligation  to  accept  or  pay  the  bill, 
(5)  where  the  drawer  has  countermanded  payment  : 
(d!)  As  regards  the  indorser  in  the  following  cases,  namely.  (1)  where 
the  drawee  is  a  fictitious  person  or  a  person  not  having  capacity 
to  contract  and  the  indorser  was  aware  of  the  fact  at  the  time  he 
indorsed  the  bill,  (2)  where  the  indorser  is  the  i)erson  to  whom 
the  bill  is  presented  for  payment,  (3)  where  the  bill  was  accepted 
or  made  for  his  accommodation. 


I02  BILLS   OF   EXCHANGE   ACT. 

51.  Noting  OP  protest  of  bill. 

(1)  Where  an  inland  bill  has  been  dishonoured  it  may,  if  the  holder  think  fit, 
be  noted  for  non-acceptance  or  non-payment,  as  the  case  may  be  ;  but  it  shall 
not  be  necessary  to  note  or  protest  any  such  bill  in  order  to  preserve  the 
recourse  against  the  drawer  or  indorser. 

(2)  Where  a  foreign  bill,  appearing  on  the  face  of  it  to  be  such,  has  been 
dishonoured  by  non-acceptance  it  must  be  duly  protested  for  non-acceptance, 
and  where  such  a  bill,  which  has  not  been  previously  dishonoured  by  non- 
acceptance,  is  dishonoured  by  non-payment  it  must  be  duly  protested  for  non- 
payment. If  it  be  not  so  protested  the  drawer  and  indorsers  are  discharged. 
Where  a  bill  does  not  appear  on  the  face  of  it  to  be  a  foreign  bill,  protest 
thereof  in  case  of  dishonour  is  unnecessary. 

(3)  A  bill  which  has  been  protested  for  non-acceptance  may  be  subsequently 
protested  for  non-payment. 

(4)  Subject  to  the  provisions  of  this  Act.  when  a  bill  is  noted  or  protested, 
it  must  be  noted  on  the  day  of  its  dishonour.  When  a  bill  has  been  duly  noted, 
the  protest  may  be  subsequently  extended  as  of  the  date  of  the  noting. 

(5)  Where  the  acceptor  of  a  bill  becomes  bankrupt  or  insolvent  or  suspends 
payment  before  it  matures,  the  holder  may  cause  the  bill  to  be  protested  for 
better  security  against  the  drawer  and  indorsers. 

(6)  A  bill  must  be  protested  at  the  place  where  it  is  dishonoured  : 
Provided  that  — 

(a)  When  a  bill  is  presented  through  the  post-office,  and  returned  by 
post  dishonoured,  it  may  be  protested  at  the  place  to  which  it  is 
returned  and  on  the  day  of  its  return  if  i-eceived  during  business 
hours,  and  if  not  received  during  business  hours,  then  not  later 
than  the  next  business  day  : 

(&)  When  a  bill  drawn  payable  at  the  place  of  business  or  residence  of 
some  person  other  than  the  drawee,  has  been  dishonoured  by  non- 
acceptance,  it  must  be  protested  for  non-payment  at  the  place 
where  it  is  expressed  to  be  payable,  and  no  further  presentment 
for  paj-ment  to,  or  demand  on,  the  drawee  is  necessary. 

(7)  A  protest  must  contain  a  copy  of  the  bill,  and  must  be  signed  by  the 
notary  making  it,  and  must  specify  — 

(o)  The  person  at  whose  request  the  bill  is  protested  : 
(6)  The  place  and  date  of  protest,  the  cause  or  reason  for  protesting  the 
bill,  the  demand  made,  and  the  answer  given,  if  any,  or  the  fact 
that  the  drawee  or  acceptor  could  not  be  found. 

(8)  Where  a  bill  is  lost  or  destroyed,  or  is  wrongly  detained  from  the  person 
entitled  to  hold  it,  protest  may  be  made  on  a  copy  or  written  particulars 
thereof. 

(9)  Protest  is  dispensed  with  by  any  circumstance  which  would  dispense 
with  notice  of  dishonour.  Delay  in  noting  or  protesting  is  excusefl  when  the 
delay  is  caused  by  circumstances  beyond  the  control  of  the  holder,  and  not 
imputable  to  his  default,  misconduct,  or  negligence.  When  the  cause  of  delay 
ceases  to  operate  the  bill  must  be  noted  or  protested  with  reasonable  diligence. 

52.  Duties  of  holder  as  regards  drawee  or  acceptor. 

(1)  When  a  bill  is  accepted  generally  presentment  for  payment  is  not  neces- 
sary in  order  to  render  the  acceptor  liable. 


LIABILITIES   OF   PARTIES.  IO3 

(2)  When  by  the  terms  of  a  qualified  acceptance  presentment  for  payment 
is  required,  the  acceptor,  in  the  absence  of  an  express  stipulation  to  that 
effect,  is  not  discharged  by  the  omission  to  present  the  bill  for  payment  on 
the  day  that  it  matures. 

(3)  In  order  to  render  the  acceptor  of  a  bill  liable  it  is  not  necessary  to  pro- 
test it,  or  that  notice  of  dishonour  should  be  given  to  him. 

(4)  Where  the  holder  of  a  bill  presents  it  for  payment,  he  shall  exhibit  the 
bill  to  the  person  from  whom  he  demands  payment,  and  when  a  bill  is  paid 
the  holder  shall  forthwith  deUver  it  up  to  the  party  paying  it. 

Liabilities  of  Parties. 

53.  Funds  in  hands  of  drawee. 

(1)  A  bill,  of  itself,  does  not  operate  as  an  assignment  of  funds  in  the  hands 
of  the  drawee  available  for  the  payment  thereof,  and  the  drawee  of  a  bUl  who 
does  not  accept  as  required  by  this  Act  is  not  liable  on  the  instrument.  This 
sub-section  shall  not  extend  to  Scotland. 

(2)  In  Scotland,  where  the  drawee  of  a  bill  has  in  his  hands  funds  available 
for  the  payment  thereof,  the  bill  operates  as  an  assignment  of  the  sum  for 
which  it  is  drawn  in  favor  of  the  holder,  from  the  time  when  the  bill  is  pre- 
sented to  the  drawee. 

54.  Liability  of  acceptor. 

The  acceptor  of  a  bill,  by  accepting  it  — 

(1)  Engages  that  he  will  pay  it  according  to  the  tenor  of  his  acceptance  : 

(2)  Is  precluded  from  denying  to  a  holder  in  due  course  : 

(a)  The  existence  of  the  drawer,  the  genuineness  of  his  signature,  and 

his  capacity  and  authority  to  draw  the  bdl ; 
(&)  In  the  case  of  a  bill  payable  to  drawer's  order,  the  then  capacity  of 

the  drawer  to  indorse,  but  not  the  genuineness  or  validity  of  his 

indorsement ; 
(c)  In  the  case  of  a  bill  payable  to  the  order  of  a  third  person,  the 

existence  of  the  payee  and  his  then  capacity  to  indorse,  but  not 

the  genuiness  or  validity  of  his  indorsement. 

55.  Liability  of  drawer  or  indorser. 

(1)  The  drawer  of  a  bill  by  drawing  it  — 

(a)  Engages  that  on  due  presentment  it  shall  be  accepted  and  paid 

according  to  its  tenor,  and  that  if  it  be  dishonoured  he  will  com- 
pensate the  holder  or  any  indorser  who  is  compelled  to  pay  it, 
provided  that  the  requisite  proceedings  on  dishonour  be  duly 
taken ; 

(b)  Is  precluded  from  denying  to  a  holder  in  due  course  the  existence 

of  the  payee  and  his  then  capacity  to  indorse. 

(2)  The  indorser  of  a  bill  by  indorsing  it  — 

(a)  Engages  that  on  due  presentment  it  shall  be  accepted  and  paid 
according  to  its  tenor,  and  that  if  it  be  dishonoured  he  will  com- 
pensate the  holder  or  a  subsequent  indorser  who  is  compelled  to 
pay  it,  provided  that  the  requisite  proceedings  on  dishonour  be 
duly  taken  ; 

(&)  Is  precluded  from  denying  to  a  holder  in  due  course  the  genuine- 


I04  BILLS   OF   EXCHANGE  ACT. 

ness  and  regularity  in  all  respects  of  the  drawer's  signature  and 
all  previous  indorsements  ; 
(c)  Is  precluded  from  denying  to  his  immediate  or  a  subsequent  indorsee 
that  the  bill  was  at  the  time  of  his  indorsement  a  valid  and  sub- 
sisting bill,  and  that  he  had  then  a  good  title  thereto. 

56.  Stranger  signing  bill  liable  as  indorser. 

Where  a  person  signs  a  bill  otherwise  than  as  drawer  or  acceptor,  he  thereby 
incurs  the  liabilities  of  an  indorser  to  a  holder  in  due  course. 

57.  Measure  of  damages  against  parties  to  dishonoured  bill. 

Where  a  bill  is  dishonoured,  the  measure  of  damages,  which  shall  be  deemed 
to  be  liquidated  damages,  shall  be  as  follows: 

(1)  The  holder  may  recover  from  any  party  liable  on  the  bill,  and  the  drawer 
who  has  been  compelled  to  pay  the  bill  may  recover  from  the  acceptor,  and 
an  indorser  who  has  been  compelled  to  pay  the  bill  may  recover  from  the 
acceptor  or  from  the  drawer,  or  from  a  prior  indorser  — 

(a)  The  amount  of  the  bill: 

(5)  Interest  thereon  from  the  time  of  presentment  for  payment  if  the 
bill  is  payable  on  demand,  and  from  the  maturity  of  the  bill  in 
any  other  case  : 

(c)  The  expenses  of  noting,  or,  when  protest  is  necessary,  and  the  pro- 
test has  been  extended,  the  expenses  of  protest. 

(2)  In  the  case  of  a  bill  which  has  been  dishonoured  abroad,  in  lieu  of  the 
above  damages,  the  holder  may  recover  from  the  drawer  or  an  indorser,  and 
the  drawer  or  an  indorser  who  has  been  compelled  to  pay  the  bill  may  recover 
from  any  party  liable  to  him,  the  amount  of  the  re-exchange  with  interest 
thereon  until  the  time  of  payment. 

(3)  Where  by  this  Act  interest  may  be  recovered  as  damages,  such  interest 
may,  if  justice  I'equire  it,  be  withheld  wholly  or  in  part,  and  where  a  bill  is 
expressed  to  be  payable  with  interest  at  a  given  rate,  interest  as  damages  may 
or  may  not  be  given  at  the  same  i-ate  as  interest  proper. 

58.  Transferor  by  delivery  and  transferee. 

(1)  Where  the  holder  of  a  bill  payable  to  bearer  negotiates  it  by  delivery 
without  indorsing  it,  he  is  called  a  "  transferor  by  delivery." 

(3)  A  transferor  by  delivery  is  not  liable  on  the  instrument. 

(3)  A  transferor  by  delivery  who  negotiates  a  bill  thereby  warrants  to  his 
immediate  transferee  being  a  holder  for  value  that  the  bill  is  what  it  purports 
to  be,  that  he  has  a  right  to  transfer  it,  and  that  at  the  time  of  transfer  he  is 
not  aware  of  any  fact  which  renders  it  valueless. 

Discharge  of  Bill. 

59.  Payment  in  due  course. 

(1)  A  bill  is  discharged  by  payment  in  due  course  by  or  on  behalf  of  the 
drawee  or  acceptor, 

"  Payment  in  due  course  "  means  payment  made  at  or  after  the  maturity  of 
the  bill  to  the  holder  thereof  in  good  faith  and  without  notice  that  his  title  to 
the  bill  is  defective. 

(2)  Subject  to  the  provisions  hereinafter  contained,  when  a  bill  is  paid  by  the 
drawer  or  an  indorser  it  is  not  discharged  ;  but 


DISCHARGE    OF   BILL.  I05 

(a)  Where  a  bill  payable  to,  or  to  the  order  of,  a  tliird  party  is  paid  by 
drawer,  the  drawer  may  enforce  payment  thereof  against  the 
acceptor,  but  may  not  I'e-issue  the  bill : 
(&)  Where  a  bill  is  paid  by  an  indorser,  or  where  a  bill  payable  to 
drawer's  order  is  paid  by  the  drawer,  the  party   paying   it  is 
remitted  to  his  former  rights  as  regards  the  acceptor  or  antece. 
dent  parties,  and  he  may,  if  he  thinks  tit,  strike  out  his  own  and 
subsequent  indorsements,  and  again  negotiate  the  bill. 
(3)  Where  an  accommodation  biU  is  paid  in  due  course  by  tlie  party  accom- 
modated the  bill  is  discharged. 

60.  Banker  paying  demand  draft  whereon  indorsement  is  forged. 

Where  a  bill  payable  to  order  on  demand  is  drawn  on  a  banker,  and  the 
banker  on  whom  it  is  drawn  pays  the  bill  in  good  faith  and  in  the  ordinary 
course  of  business,  it  is  not  incumbent  on  the  banker  to  show  that  the  indorse- 
ment of  the  payee  or  any  subsequent  indorsement  was  made  by  or  under  the 
authority  of  the  person  whose  indorsement  it  purports  to  be,  and  the  banker 
is  deemed  to  have  paid  the  bill  in  due  course,  although  such  indorsement  has 
been  forged  or  made  without  authority. 

61.  Acceptor  the  holder  at  maturity. 

When  the  acceptor  of  a  bill  is  or  becomes  the  holder  of  it  at  or  after  its 
maturity,  in  his  own  right,  the  bill  is  discharged. 

62.  Express  waiver. 

(1)  AVhen  the  holder  of  a  bill  at  or  after  its  maturity  absolutely  and  uncon- 
ditionally renounces  his  rights  against  the  acceptor  the  bill  is  discharged. 

The  renunciation  must  be  in  writing,  unless  the  bill  is  delivered  up  to  the 
acceptor. 

(2)  The  liabilities  of  any  party  to  a  bill  may  in  like  manner  be  renounced 
by  the  holder  before,  at,  or  after  its  maturity:  but  nothing  in  this  sec- 
tion shall  affect  the  rights  of  a  holder  in  due  course  without  notice  of  the 
renunciation. 

63.  Cancellation. 

(1)  Where  a  bill  is  intentionally  cancelled  by  the  holder  or  his  agent,  and 
the  cancellation  is  apparent  thereon,  the  bill  is  discharged. 

(2)  In  like  manner  any  party  liable  on  a  bill  may  be  discharged  by  the 
intentional  cancellation  of  his  signature  by  the  holder  or  his  agent.  In  such 
case  any  indorser  who  would  have  had  a  right  of  recourse  against  the  party 
whose  signature  is  cancelled,  is  also  discharged. 

(3)  A  cancellation  made  unintentionally,  or  under  a  mistake,  or  without  the 
authority  of  the  holder,  is  inoperative  ;  but  wliere  a  bill  or  any  signature 
thereon  appears  to  have  been  cancelled  the  burden  of  proof  lies  on  the  party 
who  alleges  that  the  cancellation  was  made  unintentionally,  or  under  a  mis- 
take, or  without  authority. 

64.  Alteration  of  bill. 

(1)  Where  a  bill  or  acceptance  is  materially  altered  without  the  assent  of 
all  parties  liable  on  the  biU,  the  biU  is  avoided  except  as  against  a  party  who 


I06  BILLS   OF   EXCHANGE   ACT. 

has  himself  made,  authorised,  or  assented  to  the  alteration,  and  subsequent 
indorsers. 

Provided  that, 

Where  a  bill  has  been  materially  altered,  but  the  alteration  is  not  apparent, 
and  the  bill  is  in  the  hand  of  a  holder  in  due  course,  such  holder  may  avail 
himself  of  the  bill  as  if  it  had  not  been  altered,  and  may  enforce  payment  of  it 
according  to  its  original  tenor. 

(2)  In  particular  the  following  alterations  are  material,  namely,  any  altera- 
tion of  the  date,  the  sum  payable,  the  time  of  payment,  the  place  of  payment, 
and,  where  a  bill  has  been  accepted  generally,  the  addition  of  a  place  of  pay- 
ment without  the  acceptor's  assent. 

Acceptance  and  Payment  for  Honour. 

65.  Acceptance  for  honour  supra  protest. 

(1)  Where  a  bill  of  exchange  has  been  protested  for  dishonour  by  non- 
acceptance,  or  protested  for  better  security,  and  is  not  overdue,  any  person, 
not  being  a  party  already  liable  thereon,  may,  with  the  consent  of  the  holder, 
intervene  and  accept  the  bill  supra  protest  for  the  honour  of  any  party  liable 
thereon,  or  for  the  honour  of  the  person  for  whose  account  the  bill  is  drawn. 

(2)  A  bill  may  be  accepted  for  honour  for  part  only  of  the  sum  for  which  it 
is  drawn. 

(3)  An  acceptance  for  honour  supra  protest  in  order  to  be  valid  must  — 

{a)  Be  written  on  the  bill,  and  indicate  that  it  is  an  acceptance  for 

honour: 
(b)  Be  signed  by  the  acceptor  for  honour. 

(4)  Where  an  acceptance  for  honour  does  not  expressly  state  for  whose  hon- 
our it  is  made,  it  is  deemed  to  be  an  acceptance  for  the  honour  of  the  drawer. 

(5)  Where  a  bill  payable  after  sight  is  accepted  for  honour,  its  maturity  is 
calculated  from  the  date  of  the  noting  for  non-acceptance,  and  not  from  the 
date  of  the  acceptance  for  honour. 

66.  Liability  of  acceptor  for  honour. 

(1)  The  acceptor  for  honour  of  a  bill  by  accepting  it  engages  that  he  will,  on 
due  presentment,  pay  the  bill  according  to  the  tenor  of  his  acceptance,  if  it  is 
not  paid  by  the  drawee,  provided  it  has  been  duly  presented  for  payment,  and 
protested  for  non-payment,  and  that  he  receives  notice  of  these  facts. 

(2)  The  acceptor  for  honour  is  liable  to  the  holder  and  to  all  parties  to  the 
bill  subsequent  to  the  party  for  whose  honour  he  has  accepted. 

67.  Presentment  to  acceptor  for  honour. 

(1)  Where  a  dishonoured  bill  has  been  accepted  for  honour  supra  protest,  or 
contains  a  reference  in  case  of  need,  it  must  be  protested  for  non-payment 
before  it  is  presented  for  payment  to  the  acceptor  for  honour,  or  referee  in  case 
of  need. 

(2)  Where  the  address  of  the  acceptor  for  honour  is  in  the  same  place  where 
the  bill  is  protested  for  non-payment,  the  bill  must  be  presented  to  him  not 
later  than  the  day  following  its  maturity ;  and  where  the  address  of  the 
acceptor  for  honour  is  in  some  place  other  than  the  place  where  it  was  pro- 
tested for  non-payment,  the  bill  must  be  forwarded  not  later  than  the  day 
following  its  maturity  for  presentment  to  him. 

(3)  Delay  in  presentment  or  non-presentment  is  excused  by  any  circum- 


BILL   IN   A   SET. 


107 


stance  which  would   excuse   delay  in  presentment  for  payment  or  non-pre- 
sentment for  payment. 

(4)  When  a  bill  of  exchange  is  dishonoured  by  the  acceptor  for  honour  it 
must  be  protested  for  non-payment  by  him. 

68.  Payment  for  honour  supra  protest. 

(1)  Where  a  bill  has  been  protested  for  non-payment,  any  person  may  inter- 
vene and  pay  it  supra  protest  for  the  honour  of  any  party  liable  thereon,  or  for 
the  honour  of  the  person  for  whose  account  the  bill  is  drawn. 

(2)  Where  two  or  more  persons  offer  to  pay  a  bill  for  the  honour  of  different 
parties,  the  person  whose  payment  will  discharge  most  parties  to  the  bill  shall 
have  the  preference. 

(3)  Payment  for  honour  supra  protest,  in  order  to  operate  as  such  and  not  as 
a  mere  voluntary  payment,  must  be  attested  by  a  notarial  act  of  honour  which 
may  be  appended  to  the  protest  or  form  an  extension  of  it. 

(4)  The  notarial  act  of  honour  must  be  founded  on  a  declaration  made  by  the 
payer  for  honour,  or  his  agent  in  that  behalf,  declaring  his  intention  to  pay 
the  bill  for  honour,  and  for  whose  honour  lie  pays. 

(5)  Where  a  bill  has  been  paid  for  honour,  all  parties  subsequent  to  the  party 
for  whose  honour  it  is  paid  are  discharged,  but  the  payer  for  honour  is  subro- 
gated for,  and  succeeds  to  both  the  rights  and  duties  of.  the  holder  as  regards 
the  party  for  whose  honour  he  pays,  and  all  parties  liable  to  that  party. 

(6)  The  payer  for  honour,  on  paying  to  the  holder  the  amount  of  the  bill  and 
the  notarial  expenses  incidental  to  its  dishonour,  is  entitled  to  receive  both  the 
bill  itself  and  the  protest.  If  the  holder  do  not  on  demand  deliver  them  up, 
he  shall  be  liable  to  the  payer  for  honour  in  damages. 

(7)  Where  the  holder  of  a  bill  refuses  to  receive  payment  supra  protest  he 
shall  lose  his  right  of  recourse  against  any  party  who  would  have  been  dis- 
charged by  such  payment. 

Lost  Instruments. 

69.  Holder's  right  to  duplicate  of  lost  bill. 

Where  a  bill  has  been  lost  before  it  is  overdue,  the  person  who  was  the  holder 
of  it  may  apply  to  the  drawer  to  give  him  another  bill  of  the  same  tenor,  giving 
security  to  the  drawer  if  required  to  indemnify  him  against  all  persons  what- 
ever in  case  the  bill  alleged  to  have  been  lost  shall  be  found  again. 

If  the  drawer  on  request  as  aforesaid  refuses  to  give  such  duplicate  bill, 
he  may  be  compelled  to  do  so. 

70.  Action  on  lost  bill. 

In  any  action  or  proceeding  upon  a  bill,  the  court  or  a  judge  may  order  that 
the  loss  of  the  instrument  shall  not  be  set  up,  provided  an  indemnity  be  given 
to  the  satisfaction  of  the  court  or  judge  against  the  claims  of  any  other  per- 
son upon  the  instrument  in  question. 

Bill  in  a  Set. 

71.  Rules  as  to  sets. 

(1^  Where  a  bill  is  drawn  in  a  set,  each  part  of  the  set  being  numbered,  and 
containing  a  reference  to  the  other  parts,  the  whole  of  the  parts  constitute 
one  bill. 


I08  BILLS   OF   EXCHANGE   ACT. 

(2)  Where  the  holder  of  a  set  indorses  two  or  more  parts  to  diflferent  persons, 
he  is  liable  on  every  such  part,  and  every  iudorser  subsequent  to  him  is  liable 
on  the  part  he  has  himself  indorsed  as  if  the  said  parts  were  separate  bills. 

(3)  Where  tsvo  or  more  parts  of  a  set  are  negotiated  to  different  holders  in 
due  course,  tiie  holder  whose  title  first  accrues  is  as  between  such  holders 
deemed  the  true  owner  of  the  bill ;  but  nothing  in  this  sub-section  shall  affect 
the  rights  of  a  pei-son  who  in  due  course  accepts  or  pays  the  part  first  pre- 
sented to  him. 

(4)  The  acceptance  may  be  written  on  any  part,  and  it  must  be  written  on 
one  part  only. 

If  the  drawee  accepts  more  than  one  part,  and  such  accepted  parts  gets  into 
the  hands  of  different  holders  in  due  course,  he  is  liable  on  every  such  part  as 
if  it  were  a  separate  bill. 

(5)  When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it  w^ithout  requii'ing  tlie 
part  bearing  his  acceptance  to  be  delivered  up  to  him,  and  that  part  at 
maturity  is  outstanding  in  the  hands  of  a  holder  in  due  course,  he  is  liable  to 
the  holder  thereof. 

(6)  Subject  to  the  preceding  rules,  where  any  one  part  of  a  bill  drawn  in  a 
set  is  discharged  by  payment  or  otherwise,  the  whole  bill  is  discharged. 

Conflict  of  Laws. 

72.  Rules  where  laws  conflict. 

Where  a  bill  drawn  in  one  country  is  negotiated,  accepted,  or  payable  in 
another,  the  rights,  duties,  and  liabilities  of  the  parties  thereto  are  determined 
as  follows  :  — 

(1)  The  validity  of  a  bill  as  regards  requisites  in  form  is  determined  by  the 
law  of  the  place  of  issue,  and  the  validity  as  regards  requisites  in  form  of  the 
supervening  contracts,  such  as  acceptance,  or  indorsement,  or  acceptance 
supra  protest,  is  determined  by  the  law  of  the  place  where  such  contract  was 
made. 

Provided  that  — 

(a)  Where  a  bill  is  issued  out  of  the  United  Kingdom  it  is  not  invalid 
by  reason  only  that  it  is  not  stamped  in  accordance  with  the  law 
of  the  place  of  issue  : 
(6)  Where  a  bill,  issued  out  of  the  United  Kingdom,  conforms,    as 
regards  requisites  in  form,  to  the  law  of  the  United  Kingdom,  it 
may,  for  the  purpose  of  enforcing  payment  thereof,  be  treated  as 
valid  as  between   all  persons  who  negotiate,  hold,  or  become 
parties  to  it  in  the  United  Kingdom. 
(3)  Subject  to  the  provisions  of  this  Act,  the  interpretation  of  the  drawing, 
indorsement,  acceptance,  or  acceptance  supra  protest  of  a  bill,  is  determined 
by  the  law  of  the  place  where  such  contract  is  made. 

Provided  that  where  an  inland  bill  is  indorsed  in  a  foreign  country  the 
indorsement  shall  as  regards  the  payer  be  interpreted  according  to  the  law  of 
the  United  Kingdom. 

(3)  The  duties  of  the  holder  with  respect  to  presentment  for  acceptance  or 
payment  and  the  necessity  for  or  suflSciency  of  a  protest  or  notice  of  dis- 
honour, or  otherwise,  are  determined  by  the  law  of  the  place  where  the  act  is 
done  or  the  bill  is  dishonoured. 

(4)  Where  a  bill  is  drawn  out  of  but  payable  in  the  United  Kingdom  and  the 


CROSSED   CHEQUES.  IO9 

sum  payable  is  not  expressed  in  the  currency  of  the  United  Kingdom,  the 
amount  shall,  in  the  absence  of  some  express  stipulation,  be  calculated  accord- 
ijig  to  the  rate  of  exchange  for  sight  drafts  at  the  place  of  payment  on  the  day 
the  bill  is  payable. 

(5)  Where  a  bill  is  drawn  in  one  country  and  is  payable  in  another,  the 
due  date  thereof  is  determined  according  to  the  law  of  the  place  where  it  is 
payable. 

PAET  III. 

Cheques  ox  a  Banker. 

73.  Cheque  defined. 

A  cheque  is  a  bill  of  exchange  drawn  on  a  banker  payable  on  demand. 
Except  as  otherwise  provided  in  this  Part,  the  provisions  of  this  Act  appli- 
cable to  a  bill  of  exchange  payable  on  demand  apply  to  a  cheque. 

74.  Presentment  of  cheque  for  payment. 

Subject  to  the  provisions  of  this  Act  — 

(1)  Where  a  cheque  is  not  presented  for  payment  within  a  reasonable  time 
of  its  issue,  and  the  drawer  or  the  person  on  whose  account  it  is  drawn  had 
the  right  at  the  time  of  such  presentment  as  between  him  and  the  banker  to 
have  the  cheque  paid  and  suffers  actual  damage  through  the  delay,  he  is 
discharged  to  the  extent  of  such  damage,  that  is  to  say,  to  the  extent  to  which 
such  drawer  or  person  is  a  creditor  of  such  banker  to  a  larger  amount  than  he 
would  have  been  had  such  cheque  been  paid. 

(3)  In  determining  what  is  a  reasonable  time  regard  shall  be  had  to  the 
nature  of  the  instrument,  the  usage  of  trade  and  of  bankers,  and  the  facts  of 
the  particular  case. 

(3)  The  holder  of  such  cheque  as  to  which  such  drawer  or  person  is  dis- 
charged shall  be  a  creditor,  in  lieu  of  such  drawer  or  pei-son,  of  such  banker  to 
the  extent  of  such  discharge,  and  entitled  to  recover  the  amount  from  him. 

75.  Revocation  of  banker's  authority, 

The  duty  and  authority  of  a  banker  to  pay  a  cheque  drawn  on  him  by  his 
customer  are  determined  by  — 

(1)  Countermand  of  payment : 

(2)  Notice  of  customer's  death. 

Crossed  Clieques. 

76.  General  and  special  crossings  defined. 

(1)  Where  a  cheque  bears  across  its  face  an  addition  of —  (a)  the  words  "  and 
company  "  or  any  abbreviation  thereof  between  two  parallel  transverse  lines, 
either  with  or  without  the  words  "not  negotiable  ;  "  or  (b)  two  parallel  trans- 
verse lines  simply,  either  with  or  without  the  words  "  not  negotiable, —  "  that 
addition  constitutes  a  crossing,  and  the  cheque  is  crossed  generally. 

(2)  Where  a  cheque  bears  across  its  face  an  addition  of  the  name  of  a 
banker,  either  with  or  without  the  words  "not  negotiable,"  that  addition  con- 
stitutes a  crossing,  and  the  cheque  is  crossed  specially  and  to  that  banker. 

77.  Crossing-  by  drawer  or  after  issue. 

(1)  A  cheque  may  he  crossed  generally  or  specially  by  the  drawer. 


no  BILLS   OF   EXCHANGE   ACT. 

(2)  Where  a  cheque  is  uncrossed,  the  holder  may  cross  it  generally  or 
specialh'. 

(3)  Where  a  cheque  is  crossed  generally  the  holder  may  cross  it  specially. 

(4)  Where  a  cheque  is  crossed  generally  or  specially,  the  holder  may  add 
the  words  "not  negotiable.'* 

(5)  Where  a  cheque  is  crossed  specially,  the  banker  to  whom  it  is  crossed 
may  again  cross  it  specially  to  another  banker  for  collection. 

(6)  Where  an  uncrossed  cheque,  or  a  cheque  crossed  generally,  is  sent  to  a 
banker  for  collection,  he  may  cross  it  specially  to  himself. 

78.  Crossing  a  material  part  of  check. 

A  crossing  authorized  by  this  Act  is  a  material  part  of  the  cneque  ;  it  shall 
not  be  lawful  for  any  person  to  obliterate  or,  except  as  authoi-ized  by  this  Act, 
to  add  to  or  alter  the  ci-ossing. 

79.  Duties  of  banker  as  to  crossed  cheques. 

(1)  Where  a  cheque  is  crossed  specially  to  more  than  one  banker  except 
when  crossed  to  an  agent  for  collection  being  a  banker,  the  banker  on  whom 
it  is  drawn  shall  refuse  payment  thereof. 

(2)  Where  the  banker  on  whom  a  cheque  is  drawn  which  is  so  crossed 
nevertheless  pays  the  same,  or  pays  a  cheque  crossed  generally  otherwise  than 
to  a  banker,  or  if  crossed  specially  otherwise  than  to  the  banker  to  whom  it  is 
crossed,  or  his  agent  for  collection  being  a  banker,  he  is  liable  to  the  true 
owner  of  the  cheque  for  any  loss  he  may  sustain  owing  to  the  cheque  having 
been  so  paid. 

Provided  that  where  a  cheque  is  presented  for  payment  which  does  not  at 
the  time  of  presentment  appear  to  be  crossed,  or  to  have  had  a  crossing  which 
has  been  obliterated,  or  to  have  been  added  to  or  altered  otherwise  than  as 
authorised  by  this  Act,  the  banker  paying  the  cheque  in  good  faith  and  with- 
out negligence  shall  not  be  responsible  or  incur  any  liability,  nor  shall  the 
payment  be  questioned  by  reason  of  tlie  cheque  having  been  crossed,  or  of  the 
crossing  liaving  been  oblitei'ated  or  having  been  added  to  or  altered  otherwise 
than  as  authorised  by  this  Act,  and  of  payment  having  been  made  otherwise 
than  to  a  banker  or  to  the  banker  to  whom  the  cheque  is  or  was  crossed,  or 
to  liis  agent  for  collection  being  a  banker,  as  the  case  may  be. 

80.  Protection  to  banker  and  drawer  where  cheque  is  crossed. 
Where  the  banker,  on  whom  a  crossed  cheque  is  drawn,  in  good  faith  and 

without  negligence  pays  it,  if  crossed  generally,  to  a  banker,  and  if  crossed 
specially,  to  the  banker  to  whom  it  is  crossed,  or  his  agent  for  collection  being 
a  banker,  the  banker  paying  the  cheque,  and,  if  the  cheque  has  come  into  the 
hands  of  the  payee,  the  drawer,  sliall  respectively  be  entitled  to  the  same  rights 
and  be  placed  in  the  same  position  as  if  payment  of  the  cheque  had  been  made 
to  the  true  owner  thereof. 

81.  EfTeet  of  crossing- on  holder. 

Where  a  person  takes  a  crossed  cheque  which  bears  on  it  the  words  "not 
negotiable,"  he  shall  not  have  and  shall  not  be  capable  of  giving  a  better  title 
to  the  cheque  than  that  wliich  the  j^erson  from  whom  he  took  it  had. 

82.  Protection  to  collecting  banker. 

Where  a  banker  in  good  faith  and  without  negligence  receives  payment 
for  a  customer  of  a  cheque  crossed  generally  or  specially  to  himself,  and  the 


PROMISSORY   NOTES.  I  i  i 

customer  has  no  title  or  a  defective  title  thereto,  the  banker  shall  not  incur 
any  liability  to  the  true  owner  of  the  cheque  by  reason  only  of  having  received 
such  payment. 

PART  IV. 

Promissory  Notes. 

83.  Promlssopy  note  defined. 

(1)  A  promissory  note  is  an  unconditional  promise  in  writing  made  by  one 
person  to  another  signed  by  the  maker,  engaging  to  pay,  on  demand  or  at  a 
fixed  or  determinable  future  time,  a  sum  certain  in  money,  to,  or  to  the  order 
of,  a  specified  person  or  to  bearer. 

(2)  An  instrument  in  the  form  of  a  note  payable  to  maker's  order  is  not  a 
note  within  the  meaning  of  this  section  unless  and  until  it  is  indorsed  by  the 
maker. 

(3)  A  note  is  not  invalid  by  reason  only  that  it  contains  also  a  pledge  of  col- 
lateral security  with  authority  to  sell  or  dispose  thereof. 

(4)  A  note  which  is,  or  on  the  face  of  it  purports  to  be,  both  made  and  pay- 
able within  the  British  Islands  is  an  inland  note.  Any  other  note  is  a  foreign 
note. 

84.  Delivery  necessary. 

A  promissory  note  is  inchoate  and  incomplete  until  delivery  thereof  to  the 
payee  or  bearer. 

85.  Joint  and  several  notes. 

(1)  A  promissory  note  may  be  made  by  two  or  more  makei's,  an>^  they  may 
be  liable  thereon  jointly,  or  jointly  and  severally  according  to  its  tenor. 

(2)  Where  a  note  runs  "I^jromise  to  pay"  and  is  signed  by  two  or  more 
persons  it  is  deemed  to  be  their  joint  and  several  note. 

86.  Note  payable  on  demand. 

(1)  Where  a  note  j^ayable  on  demand  has  been  indorsed,  it  must  be  pre- 
sented for  payment  within  a  reasonable  time  of  the  indorsement.  If  it  be  not 
so  presented  the  indorser  is  discharged. 

(2)  111  determining  what  is  a  reasonable  time,  regard  shall  be  had  to  the 
nature  of  the  instrument,  the  usage  of  trade  and  the  facts  of  the  particular 
case. 

(3)  Where  a  note  payable  on  demand  is  negotiated,  it  is  not  deemed  to  be 
overdue,  for  the  purpose  of  affecting  the  holder  with  defects  of  title  of  which 
he  had  no  notice,  by  reason  that  it  appears  that  a  reasonable  time  for  present- 
ing it  for  payment  has  elapsed  since  its  issue. 

87.  Presentment  of  note  for  payment. 

(1)  Where  a  promissory  note  is  in  the  body  of  it  made  payable  at  a  particular 
place,  it  must  be  presented  for  payment  at  that  place  in  order  to  render  the 
maker  liable.  In  any  other  case,  presentment  for  payment  is  not  necessary  in 
order  to  render  the  maker  liable. 

(2)  Presentment  for  payment  is  necessary  in  order  to  render  the  indorser  of 
a  note  liable. 

(3)  Where  a  note  is  in  the  body  of  it  made  payable  at  a  particular  place, 


112  BILLS   OF   EXCHANGE   ACT, 

presentment  at  that  place  is  necessary  in  order  to  render  an  indorser  liable; 
but  when  a  place  of  payment  is  indicated  by  way  of  memorandum  only, 
presentment  at  that  place  is  sufificient  to  render  the  indorser  liable,  but  a 
presentment  to  the  maker  elsewhere,  if  sufficient  in  other  respects,  shall  also 
suffice. 

88.  Liability  of  maker. 

The  maker  of  a  promissory  note  by  making  it  — 

(1)  Engages  that  he  will  pay  it  according  to  its  tenor  ; 

(2)  Is  precluded  from  denying  to  a  holder  in  due  course  the  existence  of  the 
payee  and  his  then  capacity  to  indorse. 

89.  Application  of  Part  II  to  notes. 

(1)  Subject  to  the  provisions  in  this  Part,  and  except  as  by  this  section 
provided,  the  provisions  of  this  Act  relating  to  bills  of  exchange  apply,  with 
the  necessary  modifications,  to  promissory  notes. 

(2)  In  applying  those  pi-ovisions  the  maker  of  a  note  shall  be  deemed  to 
correspond  with  the  acceptor  of  a  bill,  and  the  first  indorser  of  a  note  shall 
be  deemed  to  correspond  with  the  drawer  of  an  accepted  bill  payable  to 
drawer's  order. 

(3)  The  following  provisions  as  to  bills  do  not  apply  to  notes ;  namely, 
provisions  relating  to  — 

(a)  Presentment  for  acceptance  ; 

(b)  Acceptance ; 

(c)  Acceptance  supra  protest ; 

(d)  Bills  in  a  set. 

(4)  Where  a  foreign  note  is  dishonoured,  protest  thereof  is  unnecessary. 

PART  V. 
Supplementary. 

90.  Good  faith. 

A  thing  is  deemed  to  be  done  in  good  faith,  within  the  meaning  of  this  Act, 
where  it  is  in  fact  done  honestly,  whether  it  is  done  negligently  or  not. 

91.  Signature. 

(1)  Where,  by  this  Act,  any  instrument  or  writing  is  required  to  be  signed 
by  any  person,  it  is  not  necessary  that  he  should  sign  it  with  his  own  hand, 
but  it  is  sufficient  if  his  signature  is  written  thereon  by  some  other  person  by 
or  under  his  authority. 

(2)  In  the  case  of  a  corporation,  where  by  this  Act  any  instrument  or  writ- 
ing is  required  to  be  signed,  it  is  sufficient  if  the  instrument  or  writing  be  sealed 
with  the  corporate  seal. 

But  nothing  in  this  section  shall  be  construed  as  requiring  the  bill  or  note  of 
a  corporation  to  be  under  seal. 

92.  Computation  of  time. 

Where,  by  this  Act,  the  time  limited  for  doing  any  act  or  thing  is  less  than 
three  days,  in  reckoning  time,  non-business  days  are  excluded. 
''  Non-business  days  "  for  the  purposes  of  this  Act  mean  — 
(a)  Sunday,  Good  Friday,  Christmas  Day  : 


SUPPLEMENTARY.  II3 

(b)  A  bank  holiday  under  the  Bank  Holidays  Act,  1871,  or  acts  amend- 

ing it : 

(c)  A  day  appointed  by  Royal  proclamation  as  a  public  fast  or  thanks- 

giving day. 
Any  other  day  is  a  business  day. 

93.  When  noting  equivalent  to  protest. 

For  the  purposes  of  this  Act,  where  a  bill  or  note  is  required  to  be  protested 
within  a  specified  time  or  before  some  further  proceeding  is  taken,  it  is  suffi- 
cient that  the  bill  has  been  noted  for  protest  before  the  expiration  of  the 
specified  time  or  the  taking  of  the  proceeding  ;  and  the  formal  protest  may  be 
extended  at  any  time  thereafter  as  of  the  date  of  the  noting. 

94.  Protest  when  notary  not  accessible. 

Where  a  dishonoured  bill  or  note  is  authorized  or  required  to  he  protested, 
and  the  services  of  a  notary  cannot  be  obtained  at  the  place  where  the  bill  is 
dishonoured,  any  householder  or  substantial  resident  of  the  place  may,  in  the 
presence  of  two  witnesses,  give  a  certificate,  signed  by  them,  attesting  the  dis- 
honour of  the  bill,  and  the  certificate  shall  in  all  respects  operate  as  if  it  were 
a  formal  protest  of  the  bill. 

The  form  given  in  Schedule  1  to  this  Act  may  be  used  with  necessary  modifi- 
cations, and  if  used  shall  be  sufficient. 

95.  Dividend  warrants  may  be  crossed. 

The  provisions  of  this  Act  as  to  crossed  cheques  shall  apply  to  a  warrant  for 
payment  of  dividend. 

96.  Repeal. 

The  enactments  mentioned  in  the  second  schedule  to  this  Act  are  hereby 
repealed  as  from  the  commencement  of  this  Act  to  the  extent  in  that  schedule 
mentioned. 

Provided  that  such  repeal  shall  not  affect  anything  done  or  suffered,  or  any 
riglit,  title,  or  interest  acquired  or  accrued  before  the  commencement  of  this 
Act,  or  any  legal  proceeding  or  remedy  in  respect  of  any  such  thing,  right, 
title,  or  interest. 

97.  Savings. 

(1)  The  rules  in  bankruptcy  relating  to  bills  of  exchange,  promissory  notes, 
and  cheques,  shall  continue  to  apply  thereto  notwithstanding  anything  in  this 
Act  contained. 

(2)  The  rules  of  common  law  including  the  law  merchant,  save  in  so  far  as 
they  are  inconsistent  with  the  express  provisions  of  this  Act,  shall  continue  to 
apply  to  bills  of  exchange,  promissory  notes,  and  cheques. 

(3)  Nothing  in  this  Act  or  in  any  repeal  effected  thereby  shall  affect  — 

(a)  The  provisions  of  the  Stamp  Act,  1870,*  or  acts  amending  it,  or  any 

law  or  enactment  for  the  time  being  in  force  relating  to  the 
revenue  : 

(b)  The  provisions  of  the  Companies  Act,  1862.t  or  acts  amending  it,  or 

any  act  relating  to  joint  stock  banks  or  companies  : 

*  33  and  34  V:ct.  c.  97. 
+  25  ami  2t>  Vict  c   P9 

NEGOT.  INSTPUMENTS  —  8 


114  BILLS    OF   EXCHANGE   ACT. 

(c)  The  provisions  of  any  act  relating  to  or  confirming  the  privileges  of 

the  Bank  of  England  or  the  Bank  of  Ireland  respectively  : 

(d)  The  validity  of  any  usage  relating  to  dividend  warrants,  or  the 

indorsements  thereof. 

98.  Saving  of  summary  diligenee  in  Scotland. 

Nothing  in  this  Act  or  in  any  i-epeal  effected  thereby  shall  extend  orrestrict, 
or  in  any  way  alter  or  affect  the  law  and  practice  in  Scotland  in  regard  to 
summary  diligence. 

99.  Construction  with  other  acts,  etc. 

Where  any  act  or  document  refers  to  any  enactment  repealed  by  this  Act, 
the  act  or  document  shall  be  construed,  and  shall  operate,  as  if  it  referred  to  the 
corresponding  provisions  of  this  Act. 

100.  Parol  evidence  in  judicial  proceedings  in  Scotland. 

In  any  judicial  proceeding  in  Scotland,  any  fact  relating  to  a  bill  of 
exchange,  bank  cheque,  or  promissory  note,  which  is  relevant  to  any  question 
of  liability  thereon,  may  be  proved  by  parol  evidence:  Provided  that  this 
enactment  shall  not  in  any  way  affect  the  existing  law  and  practice  whereby 
the  party  who  is,  according  to  the  tenor  of  any  bill  of  exchange,  bank  cheque, 
or  promissory  note,  debtor  to  the  holder  in  the  amount  thereof,  may  be 
required,  as  a  condition  of  obtaining  a  sist  of  diligence,  or  suspension  of  a 
charge,  or  threatened  charge,  to  make  such  consignation,  or  to  find  such 
caution  as  the  court  or  judge  before  whom  the  cause  is  depending  may  require. 

This  section  shall  not  apply  to  any  case  where  the  bill  of  exchange,  bank 
cheque,  or  promissory  note  has  undergone  the  sesennial  prescription. 

First  Schedule.*    (Sec.  94.) 
Form  of  protest  which  may  be  used  when  the  services  of  a  notary  cannot  be 
obtained. 

Know  all  men  that  I,  A.  B.  (householder),  of  in  the  county  of 

,  in  the  United  Kingdom,  at  the  request  of  C.  D.,  there  being  no 
notary  public    available,   did   on  the  day  of  188     at 

demand  payment  (or  acceptance)  of  the  bill  of  exchange  here- 
under written,  from  K  F.,  to  which  demand  he  made  answer  (state  answer, 
if  any).  Wherefore,  I  now  in  the  presence  of  G.  H.  and  J.  K.  do  protest 
the  said  bill  of  exchange. 

(Signed)  A.  B. 

J   K  (■  ^i^'^^sses. 
N.  B.  —  The  bill  itself  should  be  annexed,  or  a  copy  of  the  bill  and  all  that 
is  written  thereon  should  be  underwritten. 

*The  other  schedules  are  purely  local  io  interest,  and  are  therefore  omitted.— Ed. 


PART  II. 
CASES   AND  AUTHORITIKS. 


["51 


EXPLANATORY  NOTE. 

The  section  numbers  opposite  the  titles  of  cases  and  elsewhere 
refer  to  the  sections  of  the  Negotiable  Instruments  Law.  The 
unbracketed  numbers  refer  to  the  sections  of  the  New  York  Act; 
the  bracketed  numbers  refer  to  the  sections  of  the  Act  as  passed  in 
the  other  States. 

[ii6] 


CASES    AND    AUTHORITIES 


ON 


NEGOTIABLE     INSTRUMENTS. 


ARTICLE  I. 

General  Provisions. 
I.  Codes  governing  bills,  notes  and  cheeks. 

I.  The  English  Bills  of  Exchange  Act. 

A  Digest  of  the  Law  of  Bills  of  Exchange,  Promissory  Notes  and 
Cheques.  By  M.  D.  Chalmers/  M.  A.,  of  the  Inner  Temple,  Barris. 
ter  at  Law.     London,  1878. 

[From  the  Introduction  to  the  First  Edition."] 

As  far  as  form  goes,  the  present  Digest  is  modeled  on  the  Indian 
Codes.  *  *  *  It  is  almost  needless  to  point  out,  that  the  simi- 
larity between  the  Indian  Codes  and  a  Digest  like  the  present  is 
merely  resemblance  in  form.  There  all  analogy  ends.  In  a  code 
the  subject  in  hand  is  treated  completely  and  finally.  A  code  states 
methodically  the  law  as  the  legislature  is  of  opinion  that  it  ought 
to  be.  This  Digest  is  an  attempt  to  state  methodically  the  law  as 
it  is.  In  a  code,  propositions  and  illustrations  are  alike  authorita- 
tive. In  this  Digest,  the  illustrations  taken  from  decided  cases  are 
alone  authoritative.  The  general  propositions  are  only  entitled  to 
weight  in  so  far  as  they  are  complete  and  legitimate  inductions  from 
decided  cases  which  are  unquestioned  law.  A  general  proposition, 
supported  by  reference  to  cases,  merely  amounts  to  a  verifiable 
hypothesis  as  to  what  the  law  is.  In  the  theorv  of  English  law, 
there  exists  in  ;///(^/(^/^^  a  complete  set  of  principles  applicable  to  every 
conceivable  state  of  facts  that  can  arise.     Theoretically  the   judges 

'  Now  his  Honor  Judge  Chalmers. 
[117] 


Il8  CODES.  [art.  I. 

do  not  make  law.  They  only  interpret  it.  They  are  merely  the 
conductors  by  which  the  principle  is  brought  down  from  the  clouds 
and  made  available  to  men.  Practically,  however,  their  functions 
are  frequently  and  of  necessity  legislative.  If  a  wide  subject  be 
investigated  systematically,  four  states  of  the  law  will  be  found  to 
exist.  First,  the  law  on  a  given  point  may  be  reasonably  certain. 
All  authority,  or  the  great  weight  of  authority,  may  be  in  favor  of 
a  given  proposition.  Secondly,  a  proposition  on  a  given  point  can 
only  be  stated  as  probably  holding  good.  For  instance,  it  may  rest 
merely  on  unchallenged  obiter  dicta,  or  there  may  be  a  decision  in 
favor  of  it,  and  weighty  obiter  dicta  opposed  to  it.  Thirdly,  the  law 
on  a  given  point  may  be  uncertain.  Decisions  may  be  in  direct 
conflict,  or  again  there  may  be  a  decision  in  point  which  has  never 
been  directly  questioned,  but  the  ratio  decidendi  of  which  seems 
entirely  opposed  to  the  principle  of  later  cases.  Fourthly,  there 
may  be  an  entire  absence  of  authority  on  a  given  question.  Such 
being  the  state  of  the  materials  available  for  forming  a  Digest,  it  is 
clear  that  if  the  subject  is  to  be  treated  methodically,  many  propo- 
sitions can  only  be  stated  tentatively.  Many  of  the  articles,  there- 
fore, are  qualified  with  a  (probably)  or  a  (perhaps),  and  the  reason 
of  the  qualification  is  then  stated  in  a  note. 

On  doubtful  points  frequent  reference  is  made  to  American  cases 
and  Continental  Codes  and  writers.  In  mercantile  matters,  when 
the  law  is  uncertain  or  authority  wanting,  there  is  an  increasing 
tendency  to  refer  to  foreign  codes  and  laws  in  order  to  see  how 
other  nations  have  solved  the  difficulty.  This  is  especially  the  case 
as  regards  negotiable  instruments,  the  most  cosmopolitan  of  all  con- 
tracts. Mr.  Justice  Story,  in  his  judgment  \n  Swift  v.  Tyson  (i6 
Peters,  i),  gives  forcible  expression  to  the  principle.  He  says, 
"  The  law  respecting  negotiable  instruments  maybe  truly  declared, 
in  the  language  of  Cicero,  adopted  by  Lord  Mansfield  in  Luke  v. 
Lyde  (2  Burr.  887),  to  be  in  a  great  measure,  not  the  law  of  a  single 
country  only,  but  of  the  commercial  world.  Nonerit  lex  alia  Romcs, 
alia  Athenis,  alia  nunc,  alia  post  hac,  sed  et  apud  omnes  gentes  et  onini  tem- 
pore ufta  eademque  lex obtinebit.'' 

An  American  decision,  it  is  needless  to  say,  is  not  a  binding 
authority  in  this  country,  but,  if  well  reasoned,  it  is  always  con- 
sidered with  respect  by  our  courts.  Many  of  the  American  judg- 
ments are  very  valuable  as  expounding  and  testing  the  principles  of 
English  decisions.  An  English  case  there,  like  an  American  case 
here,  is  only  an  authority  in  so  far  as  it  appears  to  be  a  correct 
deduction  from  the  general  principles  of  the  common  law  and  the 
law  merchant  which  prevail  in  both  countries  alike. 


I.   I.]  BILLS   OF    EXCHANGE   ACT.  II9 

When  the  subject  matter  of  an  article  of  this  Digest  is  dealt  with 
by  the  French  "  Code  de  Commerce,"  or  the  "  German  General 
Exchange  Law,  1849,"  their  respective  provisions  are  compared. 


\^From  the  Introduction  to  the  Third  Edition.^ 

Soon  after  the  publication  of  the  Second  Edition  of  this  Digest 
the  law  relating  to  bills,  notes,  and  cheques  was  codified  by  the  Bills 
of  Exchange  Act,  1882.  For  the  most  part  the  propositions  of  the 
Act  were  taken  word  for  word  from  the  propositions  of  the  Digest. 
In  the  introduction  to  the  Second  Edition  it  was  pointed  out  that 
the  general  propositions  of  the  Digest  could  only  be  considered  as 
law,  in  so  far  as  they  were  correct  and  logical  inductions  from  the 
decided  cases  which  were  cited  as  illustrations.  Now  the  position 
is  reversed.  The  cases  decided  before  the  Act  are  only  law  in  so  far 
as  they  can  be  shown  to  be  correct  and  logical  deductions  from  the 
general  propositions  of  the  Act.  The  illustrations,  therefore,  must 
always  be  tested  by  the  language  of  the  Act  itself. 

In  the  notes  to  the  Act  I  have  carefully  pointed  out  the  few  pro- 
visions which  were  deliberately  intended  to  alter  the  law.  When  a 
proposition  in  the  Act  appears  to  be  of  wide  scope,  I  have  added 
illustrations  taken  from  decided  cases.  When  a  proposition  appears 
to  be  of  narrow  scope,  I  have  merely  given  a  reference  to  the  cases 
which  were  before  me  when  drafting  it.  It  may  be  said  that  the 
Act  should  be  left  to  speak  for  itself.  I  am  well  aware  that  there 
is  no  necesssary  connection  between  the  intention  of  the  draftsman 
and  the  intention  of  the  Legislature  as  deduced  by  the  Courts  from 
the  terms  of  a  statute.  Still,  in  the  present  case,  there  will  be  a 
strong  disposition  on  the  part  of  the  Courts  to  construe  the  Act  as 
declaratory;  and  it  maybe  useful  to  the  profession  to  be  referred 
from  the  abstract  propositions  -of  the  Act,  to  the  concrete  facts 
which  gave  rise  to  them.  As  Mr.  Justice  Holmes,  in  his  admirable' 
work  on  the  Common  Law,  observes  (p.  27),  "  However  much  we 
may  codify  the  law  into  a  series  of  seemingly  self-sufficient  propo- 
sitions, those  propositions  will  be  but  a  phase  in  a  continuous  growth. 
To  understand  their  scope  fully,  to  know  how  they  will  be  dealt 
with  by  judges  trained  in  the  past  which  the  law  embodies,  we  must 
ourselves  know  something  of  that  past.  The  history  of  what  the 
law  has  been  is  necessary  to  the  knowledge  of  what  the  law  is." 

The  Bills  of  Exchange  Act,  1882,  was  the  first  enactment  codify- 
ing any  branch  of  the  Common  Law  which  found  its  way  into  the 
Statute  Book.     It  has  now  been  followed  by  the  Partnership  Act, 


I20  CODES.  [art.  I. 

1890,  which  was  originally  drafted  by  Sir  Frederick  Pollock/  But 
as  a  Code  is  still  somewhat  of  a  novelty  in  the  English  law,  it  may  be 
of  interest  to  refer  to  the  conditions  under  which  the  experiment 
was  successfully  carried  out,  and  to  consider  how  far  it  can  or  ought 
to  be  repeated  as  regards  other  portions  of  the  law.  Of  late  years 
several  attempts  at  codification  have  been  made,  but  from  various 
causes  they  have  mostly  proved  unsuccessful.  The  success  of  the 
Bills  of  Exchange  Bill  depended  on  the  wise  lines  laid  down  by  Lord 
Herschell.  He  insisted  that  the  Bill  should  be  introduced  in  a  form 
which  did  nothing  more  than  codify  the  existing  law,  and  that  all 
amendments  should  be  left  to  Parliament.  A  Bill  which  merely 
improves  the  form,  without  altering  the  substance,  of  the  law  creates 
no  opposition,  and  gives  very  little  room  for  controversy.  Of  course 
codification  pure  and  simple  is  an  impossibility.  The  draftsman 
comes  across  doubtful  points  of  law  which  he  must  decide  one  way 
or  the  other.  Again,  voluminous  though  our  case  law  is,  there  are 
occasional  gaps  which  a  codifying  bill  must  bridge  over  if  it  aims 
at  anything  like  completeness.  Still  in  drafting  the  Bills  of 
Exchange  Bill  my  aim  was  to  reproduce  as  exactly  as  possible  the 
existing  law,  whether  it  seemed  good,  bad,  or  indifferent  in  its 
effects.  The  idea  of  codifying  the  law  of  negotiable  instruments 
was  first  suggested  to  me  by  Sir  Fitz-James  Stephen's  Digest  of  the 
Law  of  Evidence,  and  Sir  F.  Pollock's  Digest  of  the  Law  of  Partner- 
ship. Bills,  notes,  and  cheques  seemed  to  form  a  well  isolated  sub- 
ject, and  I  therefore  set  to  work  to  prepare  a  digest  of  the  law  relating 
to  them.  I  found  that  the  law  was  contained  in  some  2,500  cases,  and 
17  statutory  enactments.  I  read  through  the  whole  of  the  decisions, 
beginning  with  the  first  reported  case  in  1603.  But  the  cases  on 
the  subject  were  comparatively  few  and  unimportant  until  the  time 
of  Lord  Mansfield.  The  general  principles  of  the  law  were  then 
settled,  and  subsequent  decisions,  though  very  numerous,  have  been 
for  the  most  part  illustrations  of,  or  deductions  from,  the  general 
propositions  then  laid  down.  On  some  points  there  was  a  curious 
dearth  of  authority.  As  regards  such  points  I  had  recourse  to 
American  decisions,  and  to  inquiry  as  to  the  usages  among  bankers 
and  merchants.  As  the  result,  a  good  many  propositions  in  the 
Digest,  even  on  points  of  frequent  occurrence,  had  to  be  stated  with 
a  (probably)  or  a  (perhaps).  Some  two  years  after  the  publication 
of  my  Digest,  I  read  a  paper  on  the  question  of  codifying  the  law  of 
negotiable  mstruments  before  the  Institute  of  Bankers.      Mr.  John 

'  For  an  account  of  this  Act,  see  the  Introduction  to  the  5th  edition  of  Pollock 
on  Partnership. 


I.   I.]  BILLS   OF   EXCHANGE   ACT.  121 

Hollams,  the  well  known  commercial  lawyer,  who  was  present, 
pointed  out  the  advantages  of  a  Code  to  the  mercantile  community; 
and,  mainly  I  think  on  his  advice,  I  received  instructions  from  the 
Institute  of  Bankers  and  the  Associated  Chambers  of  Commerce  to 
prepare  a  bill  on  the  subject.  The  draft  of  the  bill  was  first  sub- 
mitted to  a  sub-committee  of  the  Council  of  the  Institute  of  Bankers, 
who  carefully  tested  such  portions  of  it  as  dealt  with  matters  of 
usage  uncovered  by  authority.'  The  bill  was  then  introduced  by  Sir 
John  Lubbock,  the  President  of  the  Institute.  After  it  had  been 
read  a  second  time  in  the  Commons,  it  was  referred  to  a  strong 
Select  Committee  of  merchants,  bankers,  and  lawyers,  with  Sir 
Farrer  Herschell  as  chairman.^  As  the  Scotch  law  of  negotiable 
instruments  differed  in  certain  particulars  from  English  law,  the  bill 
was  originally  drafted  to  apply  to  England  and  Ireland  only.  The 
first  work  of  the  Select  Committee  was  to  take  the  evidence  of  Sheriff 
Dove-Wilson  of  Aberdeen,  a  well-known  authority  on  Scotch  Com- 
mercial Law.  He  pointed  out  the  particulars  in  which  the  bill,  if 
applied  to  Scotland,  would  alter  the  law  there.  With  three  excep- 
tions the  points  of  difference  were  insignificant.  The  Committee 
thereupon  resolved  to  apply  the  bill  to  Scotland,  and  Sheriff  Dove- 
Wilson  undertook  the  drafting  of  the  necessary  amendments.  Eventu- 
ally the  Scotch  rules  were  in  three  cases  preserved  as  to  Scotland, 
while  on  the  other  points  the  Scotch  rule  was  either  adopted  for 
England,  or  the  English  rule  applied  to  Scotland.  A  few  amend- 
ments in  the  law  were  made  when  the  Committee  was  unanimous  in 
their  favor,  but  very  wisely  no  amendments  were  pressed  on  which 
there  was  a  difference  of  opinion.  Sir  Farrer  Herschell  reported 
the  bill  to  the  House,  and  it  was  read  a  third  time  and  sent  up  to  the 
Lords  without  alteration.  In  the  House  of  Lords  it  was  again 
referred  to  a  Select  Committee  with  Lord  Bramwell  for  Chairman.* 
A  few  amendments  were  there  inserted,  mainly  at  Lord  Bramwell 's 
suggestion.  These  were  agreed  to  by  the  Commons,  and  the  bill 
passed  without  opposition. 

The  Act  has  now  (1891)  been  in  operation  for  more  than  eight 
years,  so  that  some  estimate  can  be  formed  as  to  its  results.  Mer- 
chants and   Bankers  say  that  it  is  a  great  convenience  to  them  to 


'  Mr.  Billinghurst,  of  the  London  and  Westminster  Bank,  and  Mr.  Slater,  of 
the  London  and  County  Bank,  undertook  the  brunt  of  the  work. 

^  The  committee  included  Sir  Farrer  Herschell,  Q.  C;  Sir  John  Lubbock.  Mr. 
Asher,  Q.  C;  Mr.  Cohen,  Q.  C;  Mr.  Reid,  Q.  C;  Mr.  Whitley,  Mr.  T.  C  Bar- 
ing, Mr.  R.  B.  Martin,  Mr.  Orr-Ewing,  Mr.  Jackson,  and  Sir  Charles  Mills. 

3  The  committee  included  the  Lord  Chancellor  (Selborne),  Lord  Bramwell, 
Lord  Fitzgerald,  Lord  Balfour  of  Burleigh,  and  Lord  Wolverton. 


122  CODES.  [art.  I. 

have  the  whole  of  the  general  principles  of  the  law  of  bills,  notes,  and 
cheques  contained  in  a  single  Act  of  loo  sections.  As  regards  par- 
ticular cases  which  arise,  it  is  seldom  necessary  to  go  beyond  the 
Act  itself.  It  must  also  be  an  advantage  to  foreigners  who  have 
English  bill  transactions  to  have  an  authoritative  statement  of  the 
English  law  on  the  subject  in  an  accessible  form.  If  I  could  do  the 
work  over  again,  I  certainly  could  do  it  better  and  should  profit 
by  past  experience.  But  i^s  it  is,  the  Act,  as  yet,  has  given  rise 
to  very  little  litigation.  I  am  sure  that  further  codifying  measures 
can  be  got  through  Parliar.^.ent,  if  those  in  charge  of  them  will  not 
attempt  too  much,  but  will  be  content  to  follow  the  lines  laid  down 
by  Lord  Herschell  Let  a  codifying  bill  in  the  first  instance  simply 
reproduce  the  existing  law,  however  defective.  If  the  defects  are 
patent  and  glaring,  it  will  be  easy  to  get  them  amended.  If  an 
amendment  be  opposed,  it  can  be  dropped  without  sacrificing  the 
bill.  The  form  of  the  law  at  any  rate  is  improved,  and  its  substance 
can  always  be  amended  by  subsequent  legislation.  If  a  bill  when 
introduced  proposes  to  effect  changes  in  the  law,  every  clause  is 
looked  at  askance,  and  it  is  sure  to  encounter  opposition. 

Assuming  then  the  possibility  of  further  codification,  the  question 
arises  whether  its  extension  is  expedient.  All  the  continental  nations 
have  codified  their  laws,  and  none  of  them  show  any  signs  of  repent- 
ing it.  On  the  contrary,  most  of  them  are  now  engaged  in  remodel- 
ing and  amplifying  their  existing  codes.  In  India  a  good  deal  of 
codification  has  been  carried  out,  and  public  and  professional  opinion 
seems  almost  unanimous  in  its  favor.  The  Bills  of  Exchange  Act, 
1882,  has  been  adopted  by  New  Zealand,  Victoria,  New  South  Wales, 
South  Australia,  Queensland,  Tasmania,  and  with  slight  modifica- 
tions by  Canada.* 


2.  The  American  Negotiable  Instruments  Law. 

Laws  of  New  York,  1890,  Chapter  205. 

§  I.  Within  thirty  days  after  the  passage  of  this  act,  the  governor 
shall  appoint,  by  and  with  the  consent  of  the  senate,  three  com- 
missioners, who  are  hereby  constituted  a  board  of  commissioners 
by  the  name  and  style  of  "  Commissioners  for  the  Promotion  of 
Uniformity  of  Legislation  in  the  United  States."  It  shall  be  the 
duty  of  said  board  to  examine  the  subjects  of  marriage  and  divorce, 
insolvency,  the  form  of  notarial  certificates  and  other  subjects;  to 

'  It  has  now  been  adopted  by  forty  of  the  English  colonies  and  dependencies. 
See  Art.  by  E.  Dove-Wilson,  on  Codification  of  Commercial  Law,  in  8  Jurid. 
Rev.  (1896),  329. —  Ed. 


I.  2.]  NEGOTIABLE   INSTRUMENTS   LAW.  I23 

ascertain  the  best  means  to  effect  an  assimilation  and  uniformity  in 
the  laws  of  the  States,  and  especially  to  consider  whether  it  would 
be  wise  and  practicable  for  the  State  of  New  York  to  invite  the  other 
States  of  the  Union  to  send  representatives  to  a  convention  to  draft 
uniform  laws  to  be  submitted  for  the  approval  and  adoption  of  the 
several  States,  and  to  devise  and  recommend  such  other  course  of 
action  as  shall  best  accomplish  the  purpose  of  this  act.' 


Report  of  Commissioners  on  Uniformity  of  Laws  to  the  Senate  of  New 
Jersey,  Session  of  1896. 

The  undersigned,'  who  were  appointed  commissioners  for  the 
promotion  of  uniformity  of  legislation  in  the  United  States,  in  pur- 
suance of  Chapter  CCXXV  of  the  Laws  of  1895,  beg  leave  to  report 
that  we  met  and  organized  on  the  14th  day  of  August  last,  and 
attended  a  conference  of  commissioners  from  different  States, 
appointed  under  similar  laws,  at  Detroit,  Michigan,  on  the  26th  of 
said  month.  Commissioners  frcm  nineteen  States  attended  the  con- 
ference, and  we  learned  that  commissioners  have  been  appointed  in 
ei-ht  other  States. 

Several  conferences  have  been  held  in  former  years,  but  as  few 
States  were  represented  it  had  not  been  thought  wise  to  attempt  to 
formulate  a  uniform  statute  on  any  important  subject. 

In  view  of  the  fact  that  nineteen  States  were  represented  by 
commissioners  at  Detroit,  and  that  commissioners  had  been  appointed 
in  other  States,  we  thought  the  time  had  arrived  when  some  import- 
ant subject  of  general  interest  should  be  taken  up.  Accordingly 
Mr.  Bergen  offered  the  following  resolution,  which  was  adopted: 

"  That  the  committee  on  commercial  law  be  requested  to  procure, 
as  soon  as  practicable,  a  draft  of  a  bill  relating  to  commercial  paper, 
based  on  the  English  statute  on  that  subject,  and  on  such  other 
sources  of  information  as  said  committee  may  deem  proper  to  con- 
sult, and  cause  said  draft  and  statute  to  be  printed  and  sent  by  mail, 
with  a  copy  of  these  resolutions,  to  every  commissioner  on  uniform 
laws  in  office,  and  invite  comments  on  said  draft. 

"  That  comments  on  said  draft  be  sent  by  commissioners  to  the 
chairman  of  said  committee  without  delay,  and  the  said  committee 
meet  at  a  place  to  be  appointed  by  its  chairman  to  revise  said  draft 
and  report  on  the  same  to  the  next  meeting  of,  this  conference." 

Subsequently  the  committee  on  commercial  law,  referred  to  in  the 

'  Similar  acts  have  been  passed  in  many  of  the  American  States,  and  commis- 
sioners appointed. — Ed. 

'  J.  Franklin  Fort,  Frank  Hjr^en  and  J.  D.  Bedle. 


124  CODES.  [art.  I. 

resolution,  met  and  appointed  a  sub-committee  of  three,  of  wtiich 
one  of  the  subscribers  is  a  member,  to  carry  out  the  instructions 
contained  in  the  resolution.  About  the  15th  of  September  last,  the 
sub-committee  employed  Mr.  John  J.  Crawford,  of  New  York  City, 
who  has  made  a  special  study  of  the  law  relating  to  commercial 
paper,  to  make  a  draft  of  a  bill  as  required  by  the  resolution.  Mr. 
Crawford  completed  the  draft  in  December,  and  it  was  thereupon 
carefully  revised  by  the  sub-committee.  It  has  been  annotated  for 
convenience  of  study.  We  submit  herewith  a  copy,  together  with  a 
copy  of  the  English  statute  relating  to  negotiable  instruments. 
Copies  have  been  sent  to  the  commissioners  of  other  States  and 
comments  invited. 

As  the  resolution  requires  the  draft  of  bill  to  be  submitted  to  the 
conference  of  commissioners  to  be  held  at  Saratoga  next  summer, 
it  should  not  be  passed  by  the  present  Legislature,  even  if  its  pro- 
visions are  satisfactory;  but  in  order  that  suggestions  and  criticism 
may  be  made  conveniently,  we  suggest  that  the  bill  be  introduced, 
and  printed  and  distributed  among  the  members  of  the  Legislature, 
or  otherwise  published. 

We  believe  that  commercial  paper  is  a  subject  on  which  it  will  be 
generally  agreed  the  law  should  be  uniform  among  the  States, 
and  as  the  subject  is  important  in  itself,  it  seems  to  us  to  be  espe- 
cially adapted  for  treatment  in  the  manner  contemplated  by  the 
statutes  under  which  the  commissioners  have  been  appointed.  We 
brought  this  matter  to  the  attention  of  the  commissioners  at  the 
conference,  not  merely  on  account  of  its  importance,  but  for  the 
reason  that  we  thought  it  would  afford  a  practical  and  probably  a 
decisive  test  of  the  question  whether  any  desirable  and  important 
reform  in  the  law  can  be  effected  by  the  voluntary  co-operation  of 
the  States. 


The  Negotiable  Instruments  Law,  with  Copious  Annotations.     By  John  J. 
Crawford,  of  the  New  York  Bar.     New  York,  1S97. 

\^Frovi  the  Preface.^ 

In  1895  the  Conference  of  Commissioners  on  Uniformity  of  Laws, 
which  met  that  year  in  Detroit,  instructed  the  Committee  on  Com- 
mercial Law  to  have  prepared  a  codification  of  the  law  relating  to  bills 
and  notes.  The  matter  was  referred  to  a  sub-committee  consisting 
of  Lyman  D.  Brewster,  of  Connecticut,  Henry  C.  Willcox,  of  New 
York,  and  Frank  Bergen,  of  New  Jersey;  and  I  was  employed  by 
the  sub-committee  to  draw  the  proposed  law.  When  completed, 
the  draft,  with  my  notes,  was  submitted  to  the  sub-committee,  who 


I.   3]  CONTINENTAL   CODES.  I25 

printed  it  and  sent  copies  to  each  member  of  the  conference,  and 
also  to  many  prominent  lawyers  and  law  professors,  and  to  several 
English  judges  and  lawyers,  with  an  invitation  for  suggestions  and 
criticisms.  The  draft  was  submitted  to  the  conference  which  met 
at  Saratoga  in  August,  1896;  and  the  commissioners  who  were  in 
attendance,  being  twenty-seven  in  all,  and  representing  fourteen 
different  States,  went  over  it  section  by  section,  and  made  some 
amendments  therein,  most  of  which  were  such  changes  in  the  exist- 
ing law  as  I  had  not  felt  at  liberty  to  incorporate  into  the  original 
draft.  The  draft  as  thus  amended  was  adopted  by  the  conference; 
and  in  such  form  it  has  been  submitted  to  the  legislatures  of  many 
of  the  States.  It  has  been  passed,  and  has  become  a  law  in  New 
York,  Connecticut,  Colorado,  and  Florida.  I  am  informed  that  the 
Commissioners  on  Uniformity  of  Laws  will  make  special  effort  to 
have  it  adopted  in  many  other  States  at  the  next  session  of  their 
legislatures. 


3.  Continental  Codes. 

Chalmers'  Digest  of  the  Law  of  Bills  of  Exchange,  etc. 

\_J^ro?n  the  Introduction  to  the  Third  Edition^ 

The  French  Code  '  is  of  particular  interest.  Although  enacted 
more  than  eighty  years  ago,  no  substantial  alteration  has  been  made 
in  it  by  subsequent  legislation.  For  many  years  it  was  the  model  of 
nearly  all  the  Continental  Codes.  For  instance,  the  Belgian  Code 
de  Commerce  of  1872  enacted  for  Belgium  the  provisions  of  the 
French  Code  regarding  bills  and  notes,  with  a  few  slight  modifica- 
tions borrowed  from  Germany,  and  the  addition  of  three  or  four 
articles  which  embodied  the  result  of  French  judicial  decisions  on 
the  construction  of  the  Code.  Of  late  years,  however,  there  has 
been  a  tendency  to  adopt  the  somewhat  wider  provisions  of  the  Ger- 
man Exchange  Law.  Until  1883  the  Italian  Commercial  Code  was 
closely  modeled  on  the  French,  but  the  new  Italian  Code  which  came 
into  force  in  1883  has  departed  from  the  French  model  as  regards 
bills  and  notes,  and  has  substantially  adopted  the  provisions  of  the 
German  Exchange  Law.  Again,  the  Portuguese  Code  of  1833  was 
mainly  founded  on  the  French  Code.  But  the  Code  of  1888  in  many 
respects  departs  from  the  French  model,  and  has  in  the  main  fol- 
lowed the  German  Exchange  Law,  though  a  few  provisions  seemed 

'  Code  de  Commerce,  1807.  This  is  available  in  translation  in  a  work  by  L. 
Goiraud  on  the  French  Code  of  Commerce,  London,  iS3o.  Articles  110-1S9  deal 
with  bills  and  notes.     Checks  are  dealt  with  in  separate  Acts  (1865  &  1874).  —  Ed. 


126  CODES.  [art.  I. 

to  be  borrowed  from  the  English  Act.  I  believe  the  Hungarian 
Code  of  1875,  the  Scandinavian  laws  of  1880,  the  Swiss  law  of  1881, 
and  the  Spanish  Code  of  1885  have  also  departed  from  the  French 
idea  and  followed  the  German  lead.  French  law  is  worthy  of  atten- 
tion in  another  respect.  In  the  absence  of  English  authority,  our 
Courts  have,  in  some  instances,  consciously  taken  it  as  their  guide. 
(See  per  Parke,  B.,  in  Foster  v.  Dawber,  6  Exch.  852.)  The  "  Code 
de  Commerce,"  to  a  great  extent,  embodies  and  enacts  the  opinions 
of  Pothier,  whose  authority,  says  Best,  C.  J.  (in  Cox  v.  Troy,  5  B.  & 
Aid.  481),  "  is  as  high  as  can  be  had  next  to  the  decision  of  a  Court 
of  Justice  in  this  country."  On  doubtful  points  not  dealt  with  by 
the  Code,  reference  is  occasionally  made  to  Pothier,  and  also  to  the 
exhaustive  treatise  of  M.  Nouguier  (Des  Lettres  de  Change  et  des 
Effets  de  Commerce,  4th  ed.  1875),  which  gives  the  latest  results 
of  French  law. 

The  German  General  Exchange  Law  of  1849  (slightly  modified, 
1869),  is  important  in  two  respects.  First,  it  is  the  most  elaborate 
and  carefully  worked  out  of  the  foreign  codes,  and  it  appears  to  be 
the  model  to  which  the  other  continental  states  (with  the  exception  of 
France)  are  now  assimilating  their  laws.  Secondly,  it  is  an  interna- 
tional and  not  merely  a  national  Code.  All  the  German  States, 
including  Austria,  have  adopted  it,  and  the  terms  of  its  adoption  are 
these:  Each  State  is  at  liberty  to  supplement  it  by  additional  laws 
of  its  own,  but  such  laws  are  not  in  any  way  to  contradict  or  over- 
ride it.  M.  Nouguier,  in  the  work  above  referred  to,  gives  in 
French  the  text  of  the  Exchange  Law,  and  also  the  various  supple- 
mentary laws  passed  by  the  different  States.' 

It  would  probably  be  very  advantageous  to  the  commercial  world 
if  this  principle  of  an  International  Code  could  be  further  extended. 
The  difficulties  of  carrying  it  out  do  not  seem  insuperable,  though, 
doubtless,  they  would  be  great.  The  provisions  of  such  a  Code 
would  have  to  be  settled  by  agreement,  and  then  each  State  would 
enact  it  for  its  own  territory.  In  the  case  of  England  it  would 
probably  be  necessary  to  confine  its  operation  to  foreign  bills,  that 
is  to  say,  to  bills  drawn  or  payable  abroad.  Our  law,  as  regards 
foreign  bills,  does  not  widely  diverge  from  the  law  of  other 
commercial  countries,  and  it  diverges  chiefly  by  allowing  greater 
latitude  than  is  adopted  in  practice. 

Occasional  reference  is  also  made  to  the  Indian  Code  (Act  XXVI, 
of  1881,  as  amended  by  Act  II  of  1885)  which  in  substance  reproduces 


'  See  Art.  by  E.  Schuster   on  the  German  Civil  Code,   12  Law  Q.  R.  (1896). 
17.  —  Ed. 


II.]  CONSTRUCTION   OF   CODES.  12/ 

the  English  law  as  it  stood  in  1881.  In  a  work  like  the  present,  it  is 
thought  it  would  be  waste  of  space  to  carry  references  to  foreign 
laws  or  authorities  any  further,  but  it  may  be  worth  while  to  men- 
tion where  they  can  be  found. 

Borchardt  (Vollstandige  Sammlung  der  geltenden  Wechsel-und 
Handels  Gesetze  aller  Lander,  187 1),  collects  the  statutory  enact- 
ments of  all  countries  relating  to  Bills  of  Exchange.  Part  I  gives  a 
German  translation,  Part  II  the  original  text.  More  than  forty 
countries  have  codified  their  law  on  this  subject;  in  fact,  some  Eng- 
lish colonies  and  the  United  States  seem  to  be  the  only  civilized 
nations  which  have  not  done  so.  Since  Borchardt's  work  was  pub- 
lished, however,  several  continental  states  have  re-cast  their  laws 
relating  to  negotiable  instruments.  A  new  Commercial  Code  has 
been  enacted  for  the  Netherlands,  and  an  official  translation  of  the 
part  relating  to  negotiable  instruments  has  been  published  in  England, 
[See  Commercial,  No.  30,  of  1880,  c.  2609.]  M.  Nouguier,  in  a 
supplementary  chapter  to  his  work  on  Bills  (Des  Lettres  de  Change, 
1S75),  compares  the  laws  of  the  chief  commercial  nations  with  the 
French  Code.  The  Comite  de  Legislation  Etrangere,  under  the 
direction  of  the  French  Ministry  of  Justice,  are  preparing  cheap 
French  translations  of  the  various  foreign  laws  relating  to  commercial 
matters.  Several  volumes  have  already  been  published  with  excel- 
lent introductions  and  notes.  Having  regard  to  our  own  insular 
isolation,  I  fear  it  will  be  long  before  any  English  government 
department  undertakes  similar  useful  work.  M.  Masse's  "  Droit 
Commercial  et  des  Gens  "  is  a  valuable  work  on  the  conflict  of  laws, 
especially  as  regards  bills.' 


n.  Construction  of  codifying:  statutes. 

Lord  Herschell  in  BANK  OF  ENGLAND  v.  VAGLIANO 

BROTHERS. 
L.  R.  1891,  Appeal  Cases,  p.  144. 

[The  question  arises  on  the  construction  of  section  7,  subsec.  3, 
of  the  Bills  of  Exchange  Act,  which  reads:  "  Where  the  payee  is  a 
fictitious  or  non-existing  person  the  bill  may  be  treated  as  payable 
to  bearer."  ^] 

My  Lords,  I  propose  to  deal  at  the  outset  with  the  question  of  the 

'  Some  of  the  Spanish-American  commercial  codes  have  been  printed  in 
translation  in  the  United  States.     See  Handbook  of  Mexico,  Chicago,  1892.  —  Ed. 

'  Observe  the  different  reading  of  the  Negotiable  Instruments  Law,  §  28  [9], 
subsec.  3.  —  Ed. 


128  CODES.  [ART.  I. 

construction  of  the  Bills  of  Exchange  Act,    which  gave  rise  to  a 
difference  of  opinion  in  the  court  below.     *     *     * 

The  conclusion  at  which  the  majority  of  the  Court  of  Appeal 
arrived  with  reference  to  the  construction  of  the  sub-section  of  the 
Bills  of  Exchange  Act  with  which  your  Lordships  have  to  deal  is 
thus  stated:  "The  word  'fictitious'  must  in  each  case  be  inter- 
preted with  due  regard  to  the  person  against  whom  the  bill  is  sought 
to  be  enforced.  If  the  drawer  is  the  person  against  whom  the  bill 
is  to  be  treated  as  a  bill  payable  to  bearer,  the  term  '  fictitious  '  may 
be  satisfied  if  it  is  fictitious  as  regards  himself,  or  in  other  words, 
fictitious  to  his  knowledge.  If  the  obligations  of  the  acceptor  are 
in  question,  and  the  acceptor  is  the  person  against  whom  the  bill  is 
to  be  so  treated,  '  fictitious  '  must  mean  fictitious  as  regards  the 
acceptor,  and  to  his  knowledge.  Such  an  interpretation  is  based  on 
good  sense  and  sound  commercial  principle." 

The  conclusion  thus  expressed  was  founded  upon  an  examination 
of  the  state  of  the  law  at  the  time  the  Bills  of  Exchange  Act  was 
passed.  The  prior  authorities  were  subjected  by  the  learned  judges 
who  concurred  in  this  conclusion  to  an  elaborate  review,  with  the 
result  that  it  was  established  to  their  satisfaction  that  a  bill  made 
payable  to  a  fictitious  person  or  his  order  was,  as  against  the 
acceptor,  in  effect  a  bill  payable  to  bearer,  only  when  the  acceptor 
was  aware  of  the  circumstance  that  the  payee  was  a  fictitious  person, 
and  further,  that  his  liability  in  that  case  depended  upon  an  applica- 
tion of  the  law  of  estoppel.  It  appeared  to  those  learned  judges 
that  if  the  exception  was  to  be  further  extended,  it  would  rest  upon 
no  principle,  and  that  they  might  well  pause  before  holding  that 
sect.  7,  sub-sect.  3,  of  the  statute  was  "  intended  not  merely  to 
codify  the  existing  law,  but  to  alter  it  and  to  introduce  so  remark- 
able and  unintelligible  a  change." 

My  Lords,  with  sincere  respect  for  the  learned  judges  who  have 
taken  this  view,  I  cannot  bring  myself  to  think  that  this  is  the  proper 
way  to  deal  with  such  a  statute  as  the  Bills  of  Exchange  Act,  which 
was  intended  to  be  a  code  of  the  law  relating  to  negotiable  instru- 
ments. I  think  the  proper  course  is  in  the  first  instance  to  examine 
the  language  of  the  statute  and  to  ask  what  is  its  natural  meaning, 
uninfluenced  by  any  considerations  derived  from  the  previous  state 
of  the  law,  and  not  to  start  with  inquiring  how  the  law  previously 
stood,  and  then,  assuming  that  it  was  probably  intended  to  leave  it 
unaltered,  to  see  if  the  words  of  the  enactment  will  bear  an  interpre- 
tation in  conformity  with  this  view. 

If  a  statute,  intended  to  embody  in  a  code  a  particular  branch  of 
the  law,  is  to  be  treated  in  this  fashion,  it  appears  to  me  that  its 


II.]  CONSTRUCTION    OF    CODE.  1 29 

Utility  will  be  almost  entirely  destroyed,  and  that  the  very  object 
with  which  it  was  enacted  will  be  frustrated.  The  purpose  of  such 
a  statute  surely  was  that  on  any  point  specifically  dealt  with  by  it, 
the  law  should  be  ascertained  by  interpreting  the  language  used 
instead  of,  as  before,  by  roaming  over  a  vast  number  of  authorities 
m  order  to  discover  what  the  law  was,  extracting  it  by  a  minute 
critical  examination  of  the  prior  decisions,  dependent  upon  a  knowl- 
edge of  the  exact  effect  even  of  an  obsolete  proceeding  such  as  a 
demurrer  to  evidence.  I  am,  of  course,  far  from  asserting  that  resort 
may  never  be  had  to  the  previous  state  of  the  law  for  the  purpose  of 
aiding  in  the  construction  of  the  provisions  of  the  code.  If,  for 
example,  a  provision  be  of  doubtful  import,  such  resort  would  be 
perfectly  legitimate.  Or,  again,  if  in  a  code  of  the  law  of  negotia- 
ble instruments  words  be  found  which  have  previously  acquired  a 
technical  meaning,  or  been  used  in  a  sense  other  than  their  ordinary 
one,  in  relation  to  such  instruments,  the  same  interpretation  might 
well  be  put  upon  them  in  the  code.  I  give  these  as  examples  merely; 
they,  of  course,  do  not  exhaust  the  category.  What,  however,  I  am 
venturing  to  insist  upon  is,  that  the  first  step  taken  should  be  to 
mterpret  the  language  of  the  statute,  and  that  an  appeal  to  earlier 
decisions  can  only  be  justified  on  some  special  ground. 

One  further  remark  I  have  to  make  before  I  proceed  to  consider 
the  language  of  the  statute.  The  Bills  of  Exchange  Act  was  cer- 
tainly not  intended  to  be  merely  a  code  of  the  existing  law.  It  is 
not  open  to  question  that  it  was  intended  to  alter,  and  did  alter  it  in 
certain  respects.  And  I  do  not  think  that  it  is  to  be  presumed  that 
any  particular  provision  was  intended  to  be  a  statement  of  the  exist- 
ing law,  rather  than  a  substituted  enactment. 

Turning  now  to  the  words  of  the  sub-section,  I  confess  they  appear 
to  me  to  be  free  from  ambiguity.  "  Where  the  payee  is  a  fictitious 
or  non-existent  person  "  means,  surely,  according  to  ordinary  canons 
of  construction,  in  every  case  where  this  can,  as  a  matter  of  fact,  be 
predicated  of  the  payee. 

I  can  find  no  warrant  in  the  staute  itself  for  inserting  any  limita- 
tion or  condition.  I  am  putting  aside  for  the  present  the  question 
by  whom  a  bill  answering  the  description  of  the  sub-section  may  be 
treated  as  payable  to  bearer,  and  I  am  accepting,  too,  for  the  moment, 
the  meaning  attributed  by  the  majority  of  the  Court  of  Appeal  to 
the  word  "  fictitious,"  viz.,  a  creation  of  the  imagination,  confining 
myself  to  the  question  in  what  cases  a  bill  purporting  on  the  face 
of  it  to  be  payable  to  order  may  be  treated  as  payable  to  bearer. 
I  find  it  impossible,  without  doing  violence  to  the  language  of  the 
statute,  to  give  any  other  answer  than  this:  —  In  all  cases  in   which 

NEGOT.   INSTRUMENTS — 9 


I30  CODES.  [art.  I. 

the  payee  is  a  fictitious  or  non-existent  person.  The  majority  of 
the  Court  of  Appeal  read  the  section  thus:  Where  the  payee  is  a  fic- 
titious or  non-existent  person,  the  bill  may,  as  against  any  party  who 
had  knowledge  of  the  fact,  be  treated  as  a  bill  payable  to  bearer. 
It  seems  to  me  that  this  is  to  add  to  the  words  of  the  statute  and  to 
insert  a  limitation  which  is  not  to  be  found  in  it  or  indicated  by  it. 
It  is  said  that  when  the  acceptor  is  the  person  against  whom  the  bill 
is  to  be  treated  as  payable  to  bearer,  ' ' '  fictitious '  must  mean  fictitious 
as  regards  the  acceptor,  and  to  his  knowledge."  With  all  respect,  I 
am  unable  to  see  why  it  must  mean  this.  I  confess  I  cannot  alto- 
gether follow  the  meaning  of  the  words  fictitious  "  as  regards  "  the 
acceptor.  I  have  a  difficulty  in  seeing  how  a  payee,  who  is  in  fact  a 
"  fictitious  "  person  in  the  sense  in  which  that  word  is  being  used, 
can  be  otherwise  than  fictitious  as  regards  all  the  world  —  how  such 
a  payee  can  be  "  fictitious  "  as  regards  one  person  and  not  another. 
The  truth  is  the  words,  "as  regards"  the  acceptor,  are  treated  as 
equivalent  to  the  words,  "  to  the  knowledge  of  "  the  acceptor.  But 
I  do  not  think  these  expressions  are  synonymous.  It  seems  to  me 
that  to  import  into  the  statute  after  the  words  "  fictitious  person  " 
the  words  "  as  regards  "  the  acceptor  or  drawer,  as  the  case  may 
be,  and  then  to  interpret  those  words  as  meaning"  to  the  knowledge 
of,"  only  tends  to  obscure  the  fact  that  the  condition  that  the  payee 
must  be  fictitious  to  the  knowledge  of  the  person  sought  to  be 
charged  as  upon  a  bill  payable  to  bearer  is  being  introduced  into 
the  enactment. 

For  the  reasons  I  have  given  I  find  myself  compelled  to  the  con- 
clusion, notwithstanding  my  respect  for  those  who  have  expressed 
a  contrary  view,  that  in  order  to  establish  the  right  to  treat  a  bill  as 
payable  to  bearer  it  is  enough  to  prove  that  the  payee  is  in  fact 
a  fictitious  person,  and  that  it  is  not  necessary  if  it  be  sought  to 
charge  the  acceptor  to  prove  in  addition  that  he  was  cognizant  of 
the  fictitious  character  of  the  payee. 

My  Lords,  if  the  conclusion  which  I  have  indicated  as  being,  in 
my  opinion,  the  sound  one,  involved  some  absurdity  or  led  to  some 
manifestly  unjust  result,  I  might  perhaps,  even  at  the  risk  of  strain- 
ing the  language  used,  strive  to  put  some  other  interpretation  upon 
it.  But  I  cannot  see  that  this  is  so,  or  that  the  interpretation  I 
have  adopted  does  any  violence  to  good  sense,  or  is  otherwise  than 
in  accordance  with  sound  commercial  principle.  I  will  assume  that 
as  the  law  stood  at  the  time  the  Bills  of  Exchange  Act  was  passed, 
a  bill  drawn  to  the  order  of  a  fictitious  payee  could  have  been  treated 
as  a  bill  payable  to  bearer  only  as  against  a  party  who  knew  that  the 
payee   was  fictitious.     This  decision  even  was  arrived  at  little  more 


II. J  CONSTRUCTION   OF   CODES.  13! 

than  a  century  ago,  and  was  dissented  from  by  distinguished  judges, 
and  it  is  obvious  from  the  observations  of  Lord  Ellenborough  in 
Bennett  N.  Farnell  (i  Camp.  130,  180,  c.)  that  by  some  eminent  law- 
yers at  least  it  was  regarded  rather  as  a  departure  from  strict  princi- 
ple, which  ought  not  to  be  further  extended  than  as  an  embodiment 
of  sound  commercial  principle. 

But  is  it  impossible  to  take  any  step  beyond  this  without  violating 
sound  principle  and  working  injustice?  [His  Lordship  then  points 
out  that  the  holder  would  suffer,  with  no  corresponding  benefit  to 
the  acceptor,  unless  a  bill  payable  to  a  fictitious  payee  be  treated  as 
one  payable  to  bearer.] 

It  may  be  that  the  right  of  the  holder  to  treat  such  a  bill,  as 
against  an  acceptor  ignorant  of  the  fictitious  character  of  the  payee, 
as  a  bill  payable  to  bearer,  could  not  be  established  merely  by  an 
appeal  to  the  law  of  estoppel,  and  that  such  estoppel  would  exist 
only  against  the  drawer  who  knew  that  the  payee  was  a  fictitious 
person.  I  will  assume  that  this  was  the  law  prior  to  the  recent 
statute.  But  why  should  not  the  Legislature  have  intervened  with 
a  positive  enactment  imposing  this  liability  upon  the  acceptor  —  an 
enactment  which,  it  seems  to  me,  would  wrong  no  one,  and  would 
prevent  a  holder  for  value  from  suffering  wrong?  Estoppel  is  not 
the  only  sound  principle  upon  which  a  law  can  be  based.  The  law 
of  estoppel  was  not  thought  to  afford  sufficient  protection  to  those 
dealing  with  the  apparent  owner  of  goods.  The  Legislature  deemed 
it  necessary  to  intervene,  and  the  Factors  Acts  were  passed,  each 
of  which  added  something  to  the  protection  of  persons  so  dealing. 
Why,  then,  should  it  be  thought  improbable  that  the  Legislature 
should  have  created  in  the  holder  of  a  bill  drawn  payable  to  a 
fictitious  person  a  new  right  against  the  acceptor?  If  I  am  correct 
in  thinking  that  this  added  right  would  obviate  and  not  entail 
injustice,  that  it  would  make  the  law  more  reasonable  and  bring  it 
more  into  conformity  with  the  course  of  commercial  transactions,  I 
can  see  no  reason  for  doubting  that  the  Legislature  so  intended,  if 
this  be  the  plain,  natural  meaning  of  the  words  they  have  used,  or 
for  endeavoring  so  to  construe  the  language  as  to  find  in  it  no  more 
than  a  statement  of  the  previous  law. 


132  THE   LAW    MERCHANT.  [ART,   I. 

III.  The  law  merchant. 

I.  The  Law  Merchant  and  its  History. 

The  Elements  of  Mercantile  Law.     By  Thomas  Edward  Scrutton. 

London,  i8gi. 

[^J^rom  Chapter  /.] 

[Books  recommended. —  The  best,  and  almost  the  only  satisfactory 
sketch  of  the  history  of  the  Law  Merchant  with  which  I  am 
acquainted,  is  the  Introduction  prefixed  by  Master  Macdonell  to 
the  tenth  edition  of  Smith's  Mercantile  Law.  See  also  the  Prefaces 
to  Chalmers  on  Bills  of  Exchange,  and  Lowndes  on  Marine  Insur- 
ance; and  Scrutton  on  the  Influence  of  the  Roman  Law  on  the  Law 
of  England,  chapters  xiii,  xiv.] 


The  fact  that  so  wide  a  meaning  is  given  ...  to  the  term 
"  Common  Law,"  may  properly  call  your  attention  to  the  different 
meanings  that  the  term  ' '  Common  Law, ' '  itself  has.  In  the  first  place 
"  Common  Law  "  is  used  in  distinction  to  "  Equity."  The  Common 
Law  alone  was  administered  by  the  King's  Courts  in  this  country,  and 
suitors  who  complained  of  the  rules  of  the  law  addressed  petitions 
to  the  King,  as  the  fountain  of  justice,  asking  for  "  Equity."  The 
Kino-,  if  he  had  time  or  inclination,  dealt  with  these  petitions  him- 
self; but  when,  as  generally  happened,  he  had  not  time  or  inclina- 
tion, he  referred  them  to  his  Chancellor,  and  the  Chancellor  dealt 
out  "  Equity  "  to  petitioners  injured  by  the  stringent  rules  of  the 
Common  Law.  The  Equity  administered  at  first  was  variable;  as 
Selden  said,  it  "  varied  with  the  length  of  the  Chancellor's  foot," 
but  by  degrees  Equity  itself  came  to  settle  down  to  rigid  rules,  until 
with  the  same  case  you  might  know  beforehand  that  you  would  be 
successful  on  the  Common  Law  side  of  Westminster  Hall  and  unsuc- 
cessful on  the  Equity  side.  At  last  under  the  Judicature  Act ' 
the  rules  of  Equity  prevailed  over  the  rules  of  Common  Law,  and 
the  distinction  became  abolished  except  in  as  far  as  certain  subjects 
were  assigned  to  the  Court  of  Chancery,  and  that  certain  subjects 
were  assigned  to  the  Queen's  Bench  Division. 

A  second  meaning  of  the  term  "  Common  Law  "  is  when  it  is  used 
in  opposition  to  "  Statute  Law."  In  that  sense  Common  Law  is  the 
unwritten  law  of  the  kingdom  which  exists  in  gremio  legis,  in  the 
bosom  of  the  judges,  which  they  bring  forth  from  that  mysterious 
recess   when  new  points  have  to  be  dealt  with;  while  the  Statute 


»  36  and  37  Vic.  c.  66,  §  5,  ss,  11. 


HI.  I.]  HISTORY    OF   THE   LAW   MERCHANT.  1 33 

Law  is  the  written  law  of  the  kingdom  as  it  has  been  laid  down  by 
the  Legislature  in  Acts  of  Parliament. 

Another  sense  in  which  the  term  "  Common  Law  "  is  used  is  when 
it  is  distinguished  from  the  "  Civil  Law,"  and  in  that  sense  the 
Common  Law  is  the  law  of  England;  the  Civil  Law  is  the  law  of 
those  countries  who  have  founded  their  system  upon  the  Roman 
Law.  For  instance,  if  you  go  north  of  the  Border  to  Scotland,  you 
find  a  system  administered  differing  from  the  Law  of  England,  and 
founded  upon  the  Civil  Law.  If  you  cross  the  Atlantic  to  the 
United  States  you  find  the  States  in  the  North,  such  as  Massachu- 
setts, administering  a  system  founded  on  Common  Law;  and  if  you 
go  to  Louisiana,  in  the  South,  you  find  a  system  founded  on  the  old 
Roman  Law,  and  known  as  a  Civil  Law  system. 

II. 
There  was  yet  another  distinction  which  leads  me  to  the  subject 
of  this  course  of  lectures.  If  you  read  the  law  reports  of  the  seven- 
teenth century  you  will  be  struck  with  one  very  remarkable  fact; 
either  Englishmen  of  that  day  did  not  engage  in  commerce,  or  they 
appear  not  to  have  been  litigious  people  in  commercial  matters,  each 
of  which  alternatives  appears  improbable.  But  it  is  a  curious  fact 
that  one  finds  in  the  reports  of  that  century,  two  hundred  years  ago, 
hardly  any  commercial  cases.  If  one  looks  up  the  Law  of  Bills  of 
Exchange,  "  the  cases  on  the  subject  are  comparatively  few  and 
unimportant  till  the  time  of  Lord  Mansfield."'  If  you  turn  to 
Policies  of  Insurance,  and  to  the  work  of  Mr.  Justice  Park  on  the 
subject  published  at  the  beginning  of  this  century,  you  find  him  say- 
ing: "  I  am  sure  I  rather  go  beyond  bounds  if  I  assert  that  in  all 
our  reports  from  the  reign  of  Queen  Elizabeth  to  the  year  1756, 
when  Lord  Mansfield  became  Chief  Justice  of  the  King's  Bench, 
there  are  sixty  cases  upon  matters  of  insurance."  *  If  you  come 
to  Charter  Parties  and  Bills  of  Lading,  which  have  always  been 
productive  of  litigation,  you  find  Sir  John  Davies  in  the  seventeenth 
century  saying  that  "  until  he  understood  the  difference  between 
the  Law  of  Merchants  and  the  Common  Law  of  England,  he  did  not 
a  little  marvel  what  should  be  the  cause  that  in  the  books  of  the 
Common  Law  of  England  there  should  be  found  so  few  cases  con- 
cerning merchants  and  ships,  but  now  the  reason  was  apparent,  for 
that  the  Common  Law  did  leave  these  cases  to  be  ruled  by  another 
law,  the  Law  Merchant,  which  is  a  branch  of  the  Law  of  Nations."  ^ 

1  Chalmers,  Bills,  Pref.  p.  36. 

«  Park,  I.  Pref.  43. 

*  Zouch.  Jurisdiction  of  the  Admiralty  (1686),  p.  89. 


134  THE   LAW    MERCHANT.  [ART.  I. 

The  reason  why  there  were  hardly  any  cases  dealing  with  com- 
mercial matters  in  the  Reports  of  the  Common  Law  Courts  is  that 
such  cases  were  dealt  with  by  special  Courts  and  under  a  special  law. 
That  law  was  an  old  established  law  and  largely  based  on  mercantile 
customs.  Gerard  Malynes,  who  wrote  the  first  work  on  the  Mer- 
chant Law  in  England,  called  his  book,  published  in  1622,  "  Consue- 
hido  vei  Lex  Mercatoria,"  or  the  Ancient  Law  Merchant;  and  he  said 
in  his  preface:  "  I  have  entituled  the  book  according  to  the  ancient 
name  of  Lex  Mercatoria  and  not  Jus  Mercatorum,  because  it  is  a 
customary  law  approved  by  the  authority  of  all  kingdoms  and  com- 
monweales,  and  not  a  law  established  by  the  sovereignty  of  any 
prince."  And  Blackstone,  in  the  middle  of  the  last  century,  says: 
"  The  affairs  of  commerce  are  regulated  by  a  law  of  their  own 
called  the  Law  Merchant  or  Lex  Mercatoria,  which  all  nations  agree 
in  and  take  notice  of,  and  it  is  particularly  held  to  be  a  part  of  the 
law  of  England  which  decides  the  causes  of  merchants  by  the  gen- 
eral rules  which  obtain  in  all  commercial  countries,  and  that  often  even 
in  matters  relating  to  domestic  trade,  as  for  instance,  in  the  draw- 
ing, the  acceptance,  and  the  transfer  of  Bills  of  Exchange."  ' 
Later  than  Blackstone,  Lord  Mansfield  lays  down  that  "  Mercantile 
Law  is  not  the  law  of  a  particular  country,  but  the  law  of  all 
nations;"'  while  so  recently  as  1883  you  find  Lord  Blackburn 
saying  in  the  House  of  Lords  that  "  the  general  Law  Merchant  for 
many  years  has  in  all  countries  caused  Bills  of  Exchange  to  be 
negotiable;  there  are  in  some  cases  differences  and  peculiarities  which 
by  the  municipal  law  of  each  country  are  grafted  on  it,  but  the  gen- 
eral rules  of  the  Law  Merchant  are  the  same  in  all  countries."  ^ 

in. 

Now  if  we  follow  the  growth  of  this  Law  Merchant  or  Mercantile 
Law,  which  was  two  hundred  years  ago  so  distinct  from  the  Com- 
mon Law,  we  find  it  in  England  going  through  three  stages  of 
development.*  The  first  stage  may  be  fixed  as  ending  at  the 
appointment  of  Coke  as  Lord  Chief  Justice  in  the  year  1606,  and 
before  that  time  you  will  find  the  Law  Merchant  as  a  special  law 
administered  by  special  Courts  for  a  special  class  of  people. 

In  the  first  place  as  to  the  special  Courts.  The  greater  part  of  the 
foreign  trade  of  England,  and  indeed  of  the  whole  of  Europe  at  that 
time,  was  conducted  in  the  great  fairs,  held  at  fixed  places  and  fixed 

'  Blackstone,  Commentaries,  I.  273;   IV.  67. 

'  Luke  V.  Lyde,  2  Burr,  at  p.  8S7. 

2  M'Lean  v.  Clydesdale  Bank,  9  App.  C,  at  p.  105. 

*  Macdonell,  Preface  to  Smith's  Mercantile  Law,  p.  82. 


III.   I.]  HISTORY   OF   THE    LAW   MERCHANT.  1 35 

times  in  each  year,  to  which  merchants  of  all  countries  came;  fairs 
very  similar  to  those  which  meet  every  year  ai  the  present  time  at 
Novgorod  in  Russia,  and  at  other  places  in  the  East.  In  England, 
also,  there  were  then  the  great  fairs  of  Winchester  and  Stourbridge, 
and  the  fairs  of  Besan9on  and  Lyons  in  France,  and  in  each  of  those 
fairs  a  Court  sat  to  administer  speedy  justice  by  the  Law  Merchant 
to  the  merchants  who  congregated  in  the  fairs,  and  in  case  of  doubt 
and  difficulty  to  have  that  law  declared  on  the  basis  of  mercantile 
customs  by  the  merchants  who  were  present.  You  will  find  this 
Court  mentioned  in  the  old  English  law  books  as  the  Court  Pepou- 
droiis,  so  called  because  justice  was  administered  "  while  the  dust 
fell  from  the  feet,"  so  quick  were  the  Courts  supposed  to  be. 
"  This  Court  is  incident  to  every  fair  and  market  because  that  for 
contracts  and  injuries  done  concerning  the  fair  or  market  there  shall 
be  as  speedy  justice  done  for  advancement  of  trade  and  traffic  as 
the  dust  can  fall  from  the  feet,  the  proceeding  there  being  de  hora 
in  horam."  *  Indeed,  so  far  back  as  Bracton  in  the  thirteenth 
century,  it  had  been  recognised  that  there  were  certain  classes  of 
people  "  who  ought  to  have  swift  justice,  such  as  merchants,  to 
whom  justice  is  given  in  the  Court  Pepoudrous."  *  The  records 
of  these  Courts  are  few,  for  obviously  in  Courts  for  rapid  business 
law  reporters  were  rather  at  a  discount.  As  a  consequence,  "  there 
is  no  part  of  the  history  of  English  law  more  obscure  than  that  con- 
nected with  the  maxim  that  the  Law  Merchant  is  part  of  the  law  of 
the  land."  ^  We  are,  however,  fortunate  enough  to  have  one  or 
two  records  of  the  Courts  of  the  Fairs.  The  Selden  Society  has 
succeeded  in  unearthing  the  Abbott's  roll  of  the  fair  of  St.  Ives  held 
in  1275  and  1291,^  containing  a  series  of  cases  which  show  how 
the  merchants  administered  the  Law  Merchant  in  the  Courts  of  the 
fair,  and  why  such  cases  did  not  come  into  the  King's  Court.  For 
instance: — "Thomas,  of  Wells,  complains  of  Adam  Garsop  that 
he  unjustly  detains  and  deforces  from  him  a  coffer  which  the  said 
Adam  sold  to  him  on  Wednesday  next  after  Mid  Lent  last  past  for 
sixpence,  whereof  he  paid  to  the  said  Adam  twopence  and  a  drink 
in  advance"  —  (it  appears  to  have  been  a  very  good  mercantile  cus- 
tom, still  existing,  to  "  wet  a  bargain,"  and  the  drink  was  a  matter 
to  which  great  importance  was  attached  by  the  merchants  present) ; 
"  and  on  the  Octave  of  Easter  came  and  would  have  paid  the  rest, 
but  the  said  Adam  would  not  receive  it  nor  answer  for  the  said  coffer, 

'  Coke,   Inst.    IV.    272.      ["  Pypowder"    courts   appurtenant    to    fairs    were 
authorized  in  New  York  in  1692.—  i  Col.  Laws  (ed.  1894),  p.  298.  —  Ed. 
^  Bracton,  f.  334. 

^  Blackburn  on  Sale,  ist  ed.  p.  207. 
*  Selden  Society,  Vol.  II.  pp.  130  et  seq. 


1 36  THE   LAW   MERCHANT.  [ART.  I. 

but  detained  it  unconditionally  to  his  damage  and  dishonour,  2^., 
and  he  produces  suit.  The  said  Adam  is  present  and  does  not 
defend.  Therefore  let  him  make  satisfaction  to  the  said  Thomas 
and  be  in  mercy  for  the  unjust  detainer;  fine  (id.\  pledge  his  over- 
coat." The  next  defendant  was  not  so  fortunate  as  to  have  an  over- 
coat. "  Reginald  Picard  of  Stamford  came  and  confessed  by  his  own 
mouth  that  he  sold  to  Peter  Redhood  of  London  a  ring  of  brass  for 
5-^^/.,  saying  that  the  said  ring  was  of  the  purest  gold,  and  that  he 
and  a  one-eyed  man  found  it  on  the  last  Sunday  in  the  churchyard 
of  St.  Ives,  near  the  cross."  (One  fancies  one  has  heard  that  tale 
about  the  brass  ring  before.)  "  Therefore  it  is  considered  that  the 
said  Reginald  do  make  satisfaction  to  the  said  Peter  for  the  5^^. 
and  be  in  mercy  for  the  trespass;  he  is  poor;  pledge  his  body." 
The  next  case  introduces  the  Law  Merchant.  "  Nicolas  Legge  com- 
plains of  Nicolas  of  Mildenhall  for  that  unjustly  he  impedes  him 
from  having,  according  to  the  usage  of  merchafits,  part  in  a  certain 
ox  which  Nicolas  of  Mildenhall  bought  in  his  presence  in  the  village 
of  St.  Ives  on  Monday  last  past  to  his  damage  2s.,  whereas  he  was 
ready  to  pay  half  the  price,  which  price  was  2s.  6d.  And  Nicolas  of 
Mildenhall  defends,  and  says  that  the  Law  Merchant  does  well  allow 
that  every  merchant  may  participate  in  a  bargain  in  the  butcher's 
trade  if  he  claim  a  part  thereof  at  the  time  of  the  sale;  but  to  prove 
that  the  said  Nicolas  Legge  was  not  present  at  the  time  of  the  pur- 
chase nor  claimed  a  part  thereof  he  is  ready  to  make  law."  Then 
they  went  to  the  proof.  The  custom  of  the  Law  Merchant  relied 
on  admitted  any  merchant  standing  by  to  claim  a  share  in  any  bargain 
on  paying  a  share  of  the  price.  The  defence  is,  "  You  were  not 
there,  so  you  cannot  claim."  The  next  and  last  case  is  one  which 
puzzled  the  Court,  and  therefore  I  omit  the  details,  but  it  is  recited 
in  the  Abbott's  roll:  "  And  the  case  is  respited  till  it  shall  be  more 
thoroughly  discussed  by  the  merchants.  And  the  merchants  of  the 
various  commonalties  and  others  being  convoked  in  full  Court  it  is 
considered  "  — and  then  they  go  on  to  discuss  it.  There  you  see 
the  Merchants'  Court  at  work,  giving  quick  justice  in  all  mercantile 
disputes,  and  in  cases  of  doubt  calling  upon  the  merchants  present 
to  declare  what  the  Law  Merchant  is.     So  much  for  the  fairs. 

In  most  seaport  towns  also  you  will  find  a  similar  Court  dealing 
with  cases  arising  out  of  ships.  In  the  Domesday  Book  of  Ipswich  ' 
it  is  stated,  "  The  pleas  between  strange  folk  that  men  call  '  pypou- 
drous  '  should  be  pleaded  from  day  to  day.  The  pleas  in  time  of 
fair  between  stranger  and  passer  should  be  pleaded  from  hour  to 

'  Black  Book  of  Admiralty,  Rolls  Series,  II.  23. 


III.   I.J  HISTORY   OF   THE   LAW    MERCHANT.  137 

hour,  as  well  in  the  forenoon  as  in  the  afternoon,  and  that  is  to  wit 
of  plaints  begun  in  the  same  time  of  fair,  and  the  pleas  given  to  the 
law  marine  for  strange  mariners  passing,  and  for  them  that  abide 
not  but  their  tide,  should  be  pleaded  from  tide  to  tide."  Any  ship 
coming  into  the  port  of  Ipswich  with  a  dispute  about  its  Charter 
Party  or  Bill  of  Lading  may  get  summary  justice  at  once  from  this 
Court  at  Ipswich  between  tide  and  tide.  Stress  may  be  laid  on  the 
fact  that  the  Courts  sat  in  the  afternoon,  because  at  that  time  the 
King's  Courts  only  sat  from  eight  in  the  morning  till  eleven  and 
then  adjourned  for  the  rest  of  the  day.  "  For  in  the  afternoons 
these  Courts  are  not  holden.  But  the  suitors  then  resort  to  the  perus- 
ing of  their  writings,  and  elsewhere  consulting  with  the  serjeants- 
at-law  and  other  their  counsellors,"  '  so  that  the  time  taken  up  in 
consultation  by  the  Courts  in  London  was  taken  up  by  the  Courts 
at  Ipswich  in  dealing  summarily  with  cases,  and  letting  the  strange 
mariners  go  who  were  only  waiting  for  their  tide. 

There  were  special  Courts  by  statute,  of  which  a  number  of  "  grave 
and  discreet  merchants  "  were  necessary  members,  in  order  that  the 
Mercantile  Law  founded  on  the  custom  of  merchants  might  be  duly 
applied  to  the  case  before  them."  The  law  which  these  Courts 
administered  was  what  was  called  by  merchants  the  Law  Merchant 
and  Law  of  the  Sea,  and  it  was  common  to  nearly  every  European 
country.  Much  of  it  was  to  be  found  in  a  series  of  codes  of  Sea 
Laws,  such  as  the  Laws  of  Oleron  and  Wisbury,  and  the  Consolato 
del  Mare,  embodying  the  customs  and  practices  of  merchants  of 
different  countries,  and  it  was  not  the  Common  Law  of  England. 
Further,  it  was  only  for  a  particular  class.  You  had  to  show  your- 
self to  be  a  merchant  before  you  got  into  the  Mercantile  Court;  and 
until  about  two  hundred  years  ago  it  was  still  necessary  to  show 
yourself  to  be  a  merchant  in  the  Common  Law  Courts  before  you 
could  get  the  benefit  of  the  Law  Merchant.^ 

IV. 

Now  the  second  stage  of  development  of  the  Law  Merchant  may 
be  dated  from  Lord  Coke's  taking  office  in  1606,  and  lasts  until  the 
time  when  Lord  Mansfield  became  Chief  Justice  in  1756,  and  during 
that  time  the  peculiarity  of  its  development  is  this:    That  the  special 

'  Sir  J.  Fortescue. 

*  E.  g.  the  Court  established  by  43  Eliz.  c.  12,  of  which  eight  "  grave  and  dis- 
creet merchants"  were  to  be  members,  who  were  to  determine  all  insurance 
cases  in  a  brief  and  summary  course,  without  formalities  of  pleadings  or 
proceedings. 

*  Vide  post ^  pp.  29,  30.     [Herein  at  p.  144. — Ed. 


138  THE   LAW    MERCHANT.  [ART.  I. 

Courts  die  out,  and  the  Law  Merchant  is  administered  by  the  King's 
Courts  of  Common  Law,  but  it  is  administered  as  a  custom  and  not 
as  law,  and  at  first  the  custom  only  applies  if  the  plaintiff  or  defend- 
ant is  proved  to  be  a  merchant.  In  every  action  on  a  Bill  of 
Exchange  it  was  necessary  formally  to  plead  "  secundum  usum  et 
consuetudinem  Mercatorum  "  — according  to  the  use  and  custom  of 
merchants;'  and  it  was  sometimes  pleaded  that  the  plaintiff  was 
not  a  merchant  but  a  gentleman.^  And  as  the  Law  Merchant  was 
considered  as  custom,  it  was  the  habit  to  leave  the  custom  and  the 
facts  to  the  jury  without  any  directions  in  point  of  law,  with  a  result 
that  cases  were  rarely  reported  as  laying  down  any  particular  rule, 
because  it  was  almost  impossible  to  separate  the  custom  from  the 
facts;  as  a  result  little  was  done  towards  building  up  any  system  of 
Mercantile  Law  in  England. 

V. 

The  construction  of  that  system  began  with  the  accession  of 
Lord  Mansfield  to  the  Chief  Justiceship  of  the  King's  Bench  in 
1756,  and  the  result  of  his  administration  of  the  law  in  the  Court 
for  thirty  years  was  to  build  up  a  system  of  law  as  part  of  the 
Common  Law,  embodying  and  giving  form  to  the  existing  cus- 
toms of  merchants.  When  he  retired,  after  his  thirty  years  of 
ofiice,  Mr.  Justice  BuUer  paid  a  great  tribute  to  the  service  that 
he  had  done.  In  giving  judgment  in  Lickbarrow  v.  Mason,"^  he 
said:  "  Thus  the  matter  stood  till  within  these  thirty  years.  Since 
that  time  the  Commercial  Law  of  this  country  has  taken  a  very 
different  turn  from  what  it  did  before.  Lord  Hardwicke  himself 
was  proceeding  with  great  caution,  not  establishing  any  general 
principle,  but  decreeing  on  all  the  circumstances  put  together. 
Before  that  period  we  find  in  Courts  of  Law  all  the  evidence  in  mer- 
cantile cases  was  thrown  together;  they  were  left  generally  to  the 
jury,  and  they  produced  no  established  principle.  From  that  time 
Ave  all  know  the  great  study  has  been  to  find  some  certain  general 
principle,  not  only  to  rule  the  particular  case  under  consideration, 
but  to  serve  as  a  guide  for  the  future.  Most  of  us  have  heard  those 
principles  stated,  reasoned  upon,  enlarged,  and  explained  till  we 
have  been  lost  in  admiration  at  the  strength  and  stretch  of  the  human 
understanding,  and  I  should  be  sorry  to  find  myself  under  the 
necessity  of  differing  from  Lord  Mansfield,  who  may  truly  be  said  to 
be  the  founder  of  the  Commercial  Law  of  this  country."  Lord 
Mansfield,  with  a  Scotch  training,  was  not  too  favourable  to  the 

'  Chalmers,  Bills,  Pref.  44. 

"^  Cf.  Sarsfield  v.   Witherby  (1692),  Carthew,  82. 

3  2  T.  R.  73, 


Ill-    i.J  HISTORY    OF   THE    LAW    MERCHANT.  1 39 

Common  Law  of  England,  and  he  derived  many  of  the  principles  of 
Mercantile  Law,  that  he  laid  down,  from  the  writings  of  foreign 
jurists,  as  embodying  the  custom  of  merchants  all  over  Europe.  For 
instance,  in  his  great  judgment  in  Luke  v,  Lydc,^  which  raised  a 
question  of  the  freight  due  for  goods  lost  at  sea,  he  cited  the  Roman 
Pandects,  the  Consolato  del  Mare,  laws  of  Wisbury  and  Oleron  two 
English  and  two  foreign  mercantile  writers,  and  the  French  Ordon- 
nances,  and  deduced  from  them  the  principle  which  has  since  been 
part  of  the  Law  of  England.''  While  he  obtained  his  legal  princi- 
ples from  those  sources,  he  took  his  customs  of  trade  and  his  facts 
from  Mercantile  Special  Juries,  whom  he  very  carefully  directed  on 
the  law;  and  Lord  Campbell,  in  his  life  of  Lord  Mansfield,  has  left 
an  account  of  Lord  Mansfield's  procedure.  He  says:  ^  "  Lord 
Mansfield  reared  a  body  of  special  jurymen  at  Guildhall,  who  were 
generally  returned  on  all  commercial  cases  to  be  tried  there.  He 
was  on  terms  of  the  most  familiar  intercourse  with  them,  not  only 
conversing  freely  with  them  in  Court,  but  inviting  them  to  dine  with 
him.  From  them  he  learned  the  usages  of  trade,  and  m  return  he 
took  great  pains  in  explaining  to  them  the  principles  of  jurispru- 
dence by  which  they  were  to  be  guided.  Several  of  these  gentle- 
men survived  when  I  began  to  attend  Guildhall  as  a  student,  and 
were  designated  and  honoured  as  '  Lord  Mansfield's  jurymen.'  One 
in  particular  I  remember,  Mr.  Edward  Vaux,  who  always  wore  a 
cocked  hat,  and  had  almost  as  much  authority  as  the  Lord  Chief 
Justice  himself." 

Since  the  time  of  Lord  Mansfield  other  judges  have  carried  on  the 
work  that  he  began,  notably  Abbott,  Lord  Chief  Justice,  afterwards 
Lord  Tenterden,  the  author  of  "  Abbott  on  Shipping,"  Mr.  Justice 
Lawrence,  and  the  late  Mr.  Justice  Willes;  and  as  the  result  of 
their  labours  the  English  Law  is  now  provided  with  a  fairly  complete 
code  of  mercantile  rules,  and  is  consequently  inclined  to  disregard 
the  practice  of  other  countries.  In  Lord  Mansfield's  time  it  would 
have  been  a  strong  argument  to  urge  that  all  other  countries  had 
adopted  a  particular  rule;  at  the  present  time  English  Courts  are 
not  alarmed  by  the  fact  that  the  law  they  administer  differs  from 
the  law  of  other  countries.  In  a  recent  case  before  the  Court  of 
Appeal,    Lord    Esher    says:*     "It    was    urged    that    even    if    the 


'  2  Burr.  883. 

'  Cf.  the  judgment  of  Willes,  J.,  in  Dakin  v.  Oxlcy,  15  C.  B.  N.  S.  646,  for 
similar  authorities. 

'  Campbell's  Lives  of  the  Lord  Chief  Justices,  IL  407,  note. 

*  Svendsen  v.  Wallace,  13  Q.  B.  D.  73,  cf.  per  Willes,  J.  in  Lloyd  v.  Guibert^ 
L.  R.  I  Q.  B.  119,  123. 


140  THE   LAW    MERCHANT.  [ART.   I. 

proposition  is  stated  in  terms  larger  than  have  hitherto  been  recog- 
nised in  English  Law,  yet  it  ought  now  to  be  adopted  in  order  to 
bring  the  principle  of  English  Law  on  the  subject  into  consonance 
with  the  laws  of  all  other  countries.  But  to  this  I  cannot  agree. 
It  is  useless  to  inquire  whether  the  law  is,  as  stated,  the  same  in  all 
European  countries.  For  if  it  is,  yet  no  English  Court  has  any 
mission  to  adapt  the  Law  of  England  to  the  laws  of  other  countries; 
it  has  authority  only  to  declare  what  the  Law  of  England  is."  Lord 
Mansfield  would  have  found  out  what  the  Law  of  England  in  mer- 
cantile matters  was  by  considering  what  was  the  law  of  other 
countries,  if  there  was  no  English  decision  laying  down  any  clear 
rule.  The  Courts  of  the  present  day  in  the  wealth  of  English  com- 
mercial law,  feel  entitled  to  disregard  the  law  of  other  countries. 

VI. 

Further  than  this,  the  Law  Merchant,  which  was  originally  based 
upon  the  usage  of  merchants,  can  now  be  extended  by  new  usages 
which  have  sprung  up,  may  be  constantly  added  to  by  proof  of  fresh 
usages  of  the  mercantile  world.  That  is  very  clearly  and  strongly 
laid  down  in  the  case  of  Goodwin  v.  Robarts.^  It  was  a  case 
involving  the  question  whether  a  particular  form  of  debenture  scrip 
was  negotiable,  and  it  was  alleged  that  by  the  custom  of  merchants 
it  had  been  so  for  the  last  twenty  years.  It  was  answered  to  that, 
relying  upon  a  judgment  of  Mr.  Justice  Blackburn,"  that  no 
addition  could  be  made  to  the  Law  Merchant  by  so  recent  a  usage 
as  twenty  years,  but  that  it  must  be  shown  to  be  part  of  the  ancient 
Law  Merchant;  but  Chief  Justice  Cockburn,  in  delivering  the  judg- 
ment of  the  Court  of  Exchequer  Chamber  in  Goodivin  v.  Robarts^  said: 
"  Having  given  the  fullest  consideration  to  this  argument,  we  are  of 
opinion  that  it  cannot  prevail.  It  is  founded  on  the  view  that  the  Law 
Merchant  is  fixed  and  stereotyped,  and  incapable  of  being  enlarged 
so  as  to  meet  the  wants  and  requirements  of  trade  m  the  varying 
circumstances  of  commerce.  It  is  true  that  Law  Merchant  is  some- 
times spoken  of  as  a  fixed  body  of  law  forming  part  of  the  law,  and, 
as  it  were,  coeval  with  it,  but  as  a  matter  of  legal  history  this  view 
is  altogether  incorrect.  .  .  .  The  Law  Merchant  is  of  com- 
paratively recent  origin;  it  is  neither  more  or  less  than  the  usages 
of  merchants  and  traders  in  the  different  departments  of  trade  rati- 
fied by  the  decisions  of  the  Courts  of  Law,  which,  upon  such  usages 
being  proved  before  them,  have  adopted  them  as  settled  law  with 

'  L.  R.  10  Ex.  346,  352. 

»  Crouch  V.  Credit  Fonder,  L.  R.  8  Q.  B.  386. 


III.   i]  HISTORY    OF   THE    LAW    MERCHANT.  I4I 

a  view  to  the  interests  of  trade  and  public  convenience,  the  Court 
proceeding  herein  on  the  well-known  principle  of  law  that,  with 
respect  to  transactions  in  the  different  departments  of  trade,  Courts 
of  Law,  in  giving  effect  to  the  contracts  and  dealings  of  the  parties, 
will  assume  that  the  latter  have  dealt  with  one  another  on  the  foot- 
ing of  any  custom  or  usage  prevailing  in  that  particular  department." 
Thus  it  is  that  Courts  of  Law  continually  take  notice  of  customs  of 
trade,  only  to  the  word  "  customs  "  they  give  a  mucu  wider  meaning 
than  it  bears  in  the  Common  Law.  A  well-known  lawyer  said  rather 
cynically  once  that  he  had  heard  a  good  many  customs  found  by 
juries,  but  he  had  never  heard  one  proved  yet;  and  it  is  so  that  the 
evidence  on  which  a  mercantile  jury,  who  know  a  great  deal  more 
about  the  matter  than  the  lawyers  or  witnesses,  very  often  will  find 
that  a  custom  exists,  is  such  as  would  not  suffice  to  establish  any 
custom  under  the  strict  rules  of  the  Common  Law. 

For  according  to  the  Common  Law  a  custom  must  have  six  attri- 
butes. In  the  first  place  it  must  date  from  time  immemorial,  which 
has  been  conveniently  fixed  by  the  Common  Law  as  when  our  Lord 
Richard  returned  from  Palestine,  in  1189.  Now,  obviously,  when 
our  Lord  Richard  returned  from  Palestine,  the  amount  of  mercantile 
custom  existing  in  England  was  of  the  very  slightest  description, 
and  if  one  is  to  trace  all  one's  mercantile  customs  back  to  his  return 
from  Palestine,  or  if  a  custom  is  liable  to  be  defeated  by  proof  of  a 
later  origin,  very  few  mercantile  customs  can  possibly  be  proved. 
The  custom  must  be  continuous  from  that  date  in  the  second  place. 
In  the  third  place  it  must  be  universally  acquiesced  in.  In  the  fourth 
place  it  must  be  reasonable.  In  the  fifth  place  it  must  be  certain; 
and  in  the  last  place  it  must  be  binding.  Now  in  proving  a  mercan- 
tile custom  you  can  dispense  with  our  Lord  Richard  at  once;  it  is 
sufficient  for  you  to  prove  that  the  custom  is  certain,  so  that  people 
know  what  it  is;  that  it  is  reasonable;  that  is  is  fairly  universal  (of 
course  it  is  not  quite  universal,  because  somebody  is  disputing  it  in 
the  action  in  question) ;  that  it  has  existed  for  some  time  (five  years 
may  suffice);  and  that  merchants  in  the  trade  consider  it  binding; 
and  on  those  lines  the  law  is  continually  being  added  to  by  the  find- 
ing of  customs  by  special  juries. 


142  THE   LAW    MERCHANT.  [ART.  I. 

2.  History  of  Negotiable  Instruments. 

(a)  Bills,  Notes  arid  Checks. 

SCRUn"ON.     Elements  of  Mercantile  Law.     iSgl. 
\jFrom  Chapter  /I.] 

[For  authorities,  see  the  Preface  to  Mr.  Chalmers'  work  on  Bills  of 
Exchange;  the  notes  to  Miller  v.  Jiace  in  i  Smith's  Leading  Cases, 
9th  ed.  p.  491;  and  the  judgment  of  Cockburn,  C.  J.,  in  Goodwin 
V.  Robarts,  L.  R.  10  Ex.  346.] 

Many  of  the  rules  of  Mercantile  Law,  the  Law  Merchant,  are 
directed  to  evade  inconvenient  rules  of  the  Common  Law. 

******** 

Another  rule  of  the  Common  Law  v/hich  is  found  inconvenient  by 
merchants  is  the  old  rule  that  a  "  chose  in  action  "  is  not  transfer- 
able. A  "  chose  in  action  "  is  a  right  to  recover  a  thing,  as  dis- 
tinguished from  the  thing  itself.  A  bill  of  lading,  as  distinguished 
from  the  goods  it  represents,  is  such  a  '  'chose  in  action. ' '  If  you  [X.] 
had  a  right  to  recover  property  from  A.,  and  wanted  to  assign  that 
right  to  B.,  so  that  B.  could  recover  such  property  from  A.,  you 
could  not  do  it  by  the  old  common  law.  Equity  would  have  recog- 
nised that  you  had  transferred  the  right  to  B.,  but  even  then  B.  must 
bring  his  action  in  the  name  of  X.,  who  had  given  him  the  right; 
he  could  not  sue  in  his  own  name.  And  further,  when  the  "  chose 
in  action  "  was  transferred,  such  a  transfer  passed  no  better  title 
than  the  transferor  had.  Now  the  Law  Merchant  dealt  with  many 
"  choses  in  action,"  and  it  would  have  been  very  inconvenient,  for 
instance,  that  the  man  who  took  a  bill  of  exchange  should  not  be 
able  to  sue  on  it  in  his  own  name,  but  should  have  to  sue  in  the 
name  of  the  man  whose  name  was  mentioned  as  payee  in  the  bill  of 
exchange.  It  would  have  been  highly  inconvenient  that  the 
indorsee  of  a  bill  of  exchange  should  have  to  inquire  into  the  title 
of  all  previous  indorsers,  to  see  that  there  was  no  defect  in  any  of 
their  titles.  As  a  result  the  Law  Merchant  establishes  certain 
instruments  or  "choses  in  action,"  which  were  transferable  by 
delivery  or  indorsement,  so  that  the  holder  could  sue  in  his  own 
name,  and  which  passed  a  good  title  to  a  transferee  who  took  them 
in  good  faith,  notwithstanding  that  the  transferor  or  his  predecessors 
had  no  title.  These  documents  had  thus  two  distinguishing  features: 
They  could  be  sued  on  by  the  holder  in  his  own  name;  and  they 
were  not  affected  by  previous  lack  of  title;  and  instruments  of  this 
class  are  called  Negotiable  Instruments.'     To  illustrate  the  general 


>  See   the  leading  case   of  Miller  v.  Race,  i  Smith  L.  C.  gth  ed.  491,  and  per 
Bowen,  L.  J.,  in  Picker  v.  London  and  County  Bank,  18  Q.  B.  D.  519. 


III.  2  ]  HISTORY    OF   NEGOTIABLE   INSTRUMENTS.  I43 

doctrine  1  have  been  explaining  to  you,  a  bill  of  exchange  is  by  the 
custom  of  merchants  transferable  either  by  delivery,  if  it  is  to  bearer, 
or  by  indorsement,  if  it  is  to  order,  and  the  indorsee  or  person  who 
takes  it  can  sue  in  his  own  name,  and  is  not  affected  by  the  fact  of 
previous  want  of  title  in  an  indorser  if  he  was  not  a  party  to  that 
defect. 

The  indorsement  of  a  bill  of  lading  by  the  custom  of  merchants 
passes  such  property  in  the  goods  represented  by  it  as  it  was  intended 
to  pass;'  but  it  needed  a  statute,  the  Bills  of  Lading  Act,^  to  get 
a  further  effect  and  allow  a  holder  of  a  bill  of  lading  to  sue  in  his 
own  name  on  the  contract  contained  in  the  bill  of  lading.  Thus  the 
bill  of  lading  obtained  a  similar  position  to  that  of  a  negotiable 
instrument  by  the  double  effect  of  the  custom  of  merchants  and  of 
the  statute.  A  policy  of  insurance  does  not  by  assignment  pass 
goods  insured  under  it,  although  the  assignee  may  by  statute  sue  in 
his  own  name,  and  therefore  it  is  not  a  complete  negotiable  instru- 
ment. For  to  make  a  negotiable  instrument  you  must  have  two 
marks;  that  the  holder  gets  a  title,  though  his  transferor  had  no 
title,  and  that  the  holder  can  sue  in  his  own  name  —  each  of  these 
marks  meeting  one  of  the  rules  of  the  Common  Law  already 
referred  to. 

The  law  of  negotiable  instruments  is,  with  some  few  exceptions 
depending  on  statutes,  entirely  built  upon  the  custom  of  merchants, 
and  the  history  of  that  law  as  applied  to  particular  classes  of  instru- 
ments you  will  find  best  stated  in  the  judgment  of  Lord  Chief  Justice 
Cockburn  in  Goodwin  v.  Robarts,^  which  I  recommend  to  your  care- 
ful reading.  The  earliest  form  of  negotiable  instrument  was  the  bill 
of  exchange."  Originally  bills  of  exchange  were  used  solely  for  the 
purpose  of  foreign  trade.  It  was  an  instrument  by  which  an  Eng- 
lish merchant  contrived  to  avoid  sending  money  out  of  the  country 
or  bringing  money  into  the  country  by  giving  an  order  on  his  foreign 
debtor  to  pay  a  third  person,  or  by  accepting  an  order  to  pay  a 
third  person  from  his  foreign  creditor.^  It  was  purely  a  trade 
transaction  for  the  purpose  of  avoiding  sending  money  out  of  the 
country,  and  the  French  Law  has  adhered  to  that  idea  of  a  bill  of 
exchange  to  this  day,  and  treats  it  merely  as  a  trade  transaction. 
The  English  Law  has  treated  it  as  an  instrument  of  credit.  Bills  of 
exchange  seem  to  have  been  introduced  into  England  by  the  Vene- 

'  Vide  post,  p.  153. 

«  18  &  19  Vic.  c.  III. 

2  L.  R.  10  Ex.  346. 

*  Defined  in  Bills  of  Exchange  Act,  1882,  §  3,  a^ndi  post,  pp.  40,  41. 

'  See  Chalmers,  Bills,  Pref   p.  46. 


144  THE    LAW    MERCHANT.  [ART.  I. 

tians  or  Florentines,  and  there  were  bills  of  exchange  for  foreign 
trade  known  to  England  as  early  as  the  reign  of  Richard  II.  Tne 
first  reported  case  in  the  English  Courts  is  in  the  year  1603,'  and 
the  Courts,  in  developing  what  was  originally  simply  a  bill  in  a 
transaction  of  foreign  trade,  have  followed  the  custom  of  merchants. 
Chief  Justice  Treby,  in  the  case  of  Bromwich  v.  Lloyd,"^  explained 
the  stages  by  which  a  bill  of  exchange  was  developed.  "  Bills  of 
Exchange,"  he  said,  "at  first  extended  only  to  merchant  strangers 
trafficking  with  English  merchants;  and  afterwards  to  inland  bills 
between  merchants  trafficking  the  one  with  the  other  in  England; 
and  afterwards  to  all  traders,  and  then  to  all  persons  whether 
traders  or  not;  and  there  was  then  no  need  to  allege  any  cus- 
tom of  merchants."  So  beginning  with  the  necessity  to  allege 
an  English  merchant  and  a  foreign  merchant,  you  dispense  with 
the  foreign  merchant  and  allege  two  English  merchants  trading; 
then  you  dispense  with  the  particular  transaction  of  trade;  then 
you  drop  the  trader,  or  the  allegation  that  there  is  any  merchant  at 
all,  and  simply  produce  the  bill.  But  in  a  case  in  1613  '  there  was 
a  plea  that  an  acceptor  of  a  bill  of  exchange  was  not  a  merchant, 
and  it  was  held  a  good  answer.  A  bill  of  exchange  could  not  be 
made  at  that  time  by  people  who  were  not  merchants.  In  1692, 
however,  the  Courts  had  got  a  little  further.''  There  was  a  plea 
then  that  the  acceptor  of  a  bill  of  exchange  was  a  gentleman  and 
not  a  merchant,  and  the  Court  of  Queen's  Bench,  following  the 
earlier  case,  held  that  a  good  defence;  but  the  Court  of  Appeal,  the 
Exchequer  Chamber,  reversed  the  decision,  "  having  consideration 
to  the  inconvenience  that  might  ensue  and  the  suspicion  which  might 
increase  among  foreign  merchants,"  and  they  laid  down  very  sensi- 
bly that  if  "  gentlemen  "  took  upon  themselves  to  accept  bills  they 
ought  to  pay  them.  The  custom  of  merchants  has  gone  on  develop- 
ing bills  of  exchange  until  the  law  with  regard  to  them  is  now  all  but 
settled;  they  pass  by  indorsement  or  delivery  the  right  to  the 
indorsee  to  sue  in  his  own  name;  they  pass  title  to  a  bona  fide  holder 
for  value  though  the  indorser's  title  is  bad;  and  it  is  not  necessary 
to  allege  any  consideration  for  the  bill,  for  consideration  is  presumed 
until  the  contrary  is  proved.  The  only  trace  of  the  former  history 
of  bills  of  exchange  is  the  difference  between  inland  and  foreign  bills 
of  exchange,  which  is,  in  the  words  of  Lord  Holt,  "  All  the  differ- 
ence between  foreign  and  inland  bills  is  that  foreign  bills  must  be 


'  Martin  v.  Boure,  Cro.  Jac.  6. 

'  (1698)  2  Lutwyche's  Reports,  p.  1585. 

*  Oaste  V.  Taylor,  i  Cro.  Jac.  306. 

*  Sarsfield  v.  Witherby,  Carthew,  82. 


III.  2.]  HISTORY    OF   NEGOTIABLE    INSTRUMENTS.  I45 

protested  before  a  notary  before  the  drawer  can  be  charged;  but 
inland  bills  need  no  protest,"  '  notice  of  dishonour  being  sufficient. 
The  next  document  which  obtained  the  features  of  negotiability 
was  a  promissory  note.  In  a  bill  of  exchange  there  are,  after 
acceptance,  two  people  who  offer  security  to  the  holder,  the  drawer 
and  the  acceptor;  in  a  promissory  note  there  is  at  first  only  the 
single  security,  that  of  the  person  who  promises  in  the  note  to  pay. 
The  first  case  in  which  promissory  notes  were  recognised  by  the 
Courts  as  negotiable  instruments  was  the  case  of  Sheldcn  v.  Uentlty,^ 
in  1680,  where  the  Court  held  a  promissory  note  to  be  a  negotiable 
instrument,  expressly  saying  that  "  it  was  the  custom  of  merchants 
that  made  that  good."  That  decision  for  some  years  afterwards 
was  followed  in  other  cases  till  Holt  became  Chief  Justice.  Lord 
Holt  set  his  face  agamst  the  custom  of  merchants  and  against 
promissory  notes  as  negotiable  instruments.  In  the  case  of  Clarke 
V.  Martin^  the  reporter  says:  "  But  Holt,  C.  J.,  was  with  all  his 
strength  against  this  action,  (on  a  promissory  note),  and  said  that 
this  note  could  not  be  a  bill  of  exchange;  that  the  maintaining  of 
these  actions  upon  such  notes  were  innovations  upon  the  rules 
of  Common  Law,  and  that  it  amounted  to  setting  up  a  new  sort  of 
specialty  unknown  to  the  Common  Law,  and  invented  in  Lombard 
Street,  which  attempted  in  these  matters  of  bills  of  exchange  to  give 
laws  to  Westminster  Hall;  that  the  continuing  to  declare  upon  these 
notes  upon  the  custom  of  merchants  proceeded  from  obstinacy  and 
opinionativeness,  since  he  had  always  expressed  his  opinion  against 
them."  It  appears  that  Lombard  Street  and  the  merchants  therein 
thought  that  the  "obstinacy  and  opinionativeness"  was  upon  the 
side  of  Lord  Holt,  for  they  continued  to  use  these  documents  and 
to  sue  upon  them;  and  in  the  next  year,  in  another  case  of  Biiller 
V.  Crispe,*'  Lord  Holt  again  expressed  his  opinion  in  strong  terms, 
and  said  that  these  notes  were  not  in  the  nature  of  bills  of  exchange, 
but  were  only  an  invention  of  the  goldsmiths  in  Lombard  Street, 
who  had  a  mind  to  make  a  law  to  bind  all  that  did  deal  M'ith  them. 
"  At  another  day  Holt,  C.  J.,  declared  that  he  had  desired  to  speak 
with  two  of  the  most  famous  merchants  in  London,  to  be  informed 
of  the  mighty  ill-consequences  that  it  was  pretended  would  ensue  by 
obstructing  this  form,  and  they  had  told  him  that  it  was  very  fre- 
quent with  them  to  make  such  notes,  and  that  they  looked  upon 
them  as  bills  of  exchange,  and  that  they  had  been  used  for  a  matter 

'  Buller  V.  Cripps,  6  Mod.  29. 
'  2  Showers,  p.  160. 
'  (1702)  2  Lord  Raymond.  758. 
*  6  Modern  Reports,  p.  29. 

NEGOT.  INSTRUMENTS — lO 


146  THE   LAW    MERCHANT.  [ART.  I. 

of  thirty  years;  that  not  only  notes  but  bonds  for  money  were  trans- 
ferred frequently,  and  endorsed  as  bills  of  exchange,"  and  the 
reporter  winds  up  significantly,  "  the  Court  at  last  took  the  vacation 
to  consider  of  it."  Parliament  stepped  in  and  saved  them  ffom 
considering  it  any  further,  for  by  an  act  of  the  year  1704'  it  was 
expressly  provided  that  promissory  notes  should  be  deemed  as 
negotiable  as  bills  of  exchange.  The  preamble  of  the  Act  began: 
"  Whereas  it  hath  been  held  that  promissory  notes  are  not  indorsable 
over,  within  the  custom  of  merchants,  therefore  to  encourage  trade 
and  commerce  be  it  enacted."  So  in  this  case  also  the  custom  of 
merchants  introduced  an  innovation  into  the  law  of  Westminster 
Hall,  although  it  needed  the  sanation  of  Parliament  to  induce  West- 
minster Hall  to  recognise  it. 

The  next  step  in  the  history  was  that  bankers  and  goldsmiths  who 
held  money  on  deposit  began  to  issue  promissory  notes  payable  on 
demand,  that  is  to  say  they  began  to  issue  Bank  Notes.  To  these 
again  the  custom  of  merchants  very  speedily  gave  negotiability,  and 
in  the  leading  cc.se  of  Miller  v.  Race,''  Lord  Mansfield  decided  that 
bank  notes  also  were  negotiable  instruments,  holding  that  it  was 
necessary  for  the  purposes  of  commerce  that  their  currency  should 
be  established  and  secured.  And  by  the  custom  of  merchants, 
bank  notes  have  acquired  a  superior  position  to  promissory  notes. 
They  are  payable  to  any  holder  who  may  present  them  without  the 
necessity  of  his  indorsing  them.  There  is  a  legend  that  the  Bank  of 
England  always  required  persons  presenting  their  bank  notes  to 
indorse  them,  and  that  on  one  occasion  when  the  clerk  of  the  bank 
behind  the  counter  spoke  in  rather  a  cavalier  manner  to  a  gentleman 
who  came  in,  telling  him  that  he  could  not  be  paid  unless  he  wrote 
his  name  on  the  back,  the  gentleman  with  the  note  walked  out  and 
promptly  sued  the  Bank  of  England  for  dishonouring  their  promis- 
sory note,  and  of  course  sued  them  successfully,  with  the  result  of 
altering  the  custom  at  the  Bank.  Bank  of  England  notes  are  now 
legal  currency  and  tender,  and  in  the  case  of  country  banks  their 
notes  may  be,  under  certain  circumstances,  treated  as  currency  and 
payment. 

The  next  step  was  when  the  banks,  besides  issuing  their  promis- 
sory notes  payable  on  demand,  or  bank  notes,  accepted  and  honoured 
bills  of  exchange  drawn  on  them  by  their  customers,  payable  on 
demand;  that  is  to  say  when  the  system  of  Cheques  came  into  exist- 
ence, for  a  cheque  is  a  bill  of  exchange  drawn  on  a  bank  by  its  cus- 


'  3  &  4  Anne,  c.  9. 

'  I  Smith's  Leading  Cases,  gth  ed.  p.  490. 


III.   2.]  HISTORY    OF   NEGOTIABLE    INSTRUMENTS.  147 

tomer,  payable  on  demand.'  To  cheques,  also,  the  practice  of  mer- 
chants has  affixed  certain  incidents,  as  for  instance  the  practice  of 
crossing  cheques,  which  originated  partly  in  the  usages  of  commerce 
and  partly  in  the  Clearing  House;  and  has  now  been  definitely 
recognised  by  Act  of  Parliament.  Banks,  by  the  custom  of 
merchants,  are  also  bound  to  honour  cheques  if  they  have  funds  of 
the  customer  in  their  hands;  though  a  drawee,  even  though  he  had 
funds  in  his  hand,  would  not  be  bound  to  accept  a  bill  of  exchange. 
So  far,  the  law  of  negotiable  instruments,  (bills  of  exchange, 
promissory  notes,  cheques,  bank  notes),  has  been  codified  by  Parlia- 
ment in  the  Bills  of  Exchange  Act,  1882;  "  an  Act  to  codify  the  law 
relating  to  bills  of  exchange,  cheques,  and  promissory  notes,"  '  and 
on  all  matter  treated  on  by  that  Act  the  Law  Merchant  is  now  to  be 
found  in  its  clauses,  and  not  in  the  cases  and  customs  on  which 
those  clauses  were  founded. 


Chalmers'  Digest  of  Bills  of  Exchange,  etc. 
{From  the  Introduction  to  the  Third  Edition.'] 

The  results  of  this  formation  of  the  law  by  custom  are  instructive. 
A  reference  to  Marius'  treatise  on  Bills  of  Exchange,  written  about 
1670,  or  Beawes'  Lex  Mercatoria,  written  about  1720,  will  show  that 
the  law,  or  perhaps  rather  the  practice,  as  to  bills  of  exchange,  was 
even  then  pretty  well  defined.  Comparing  the  usage  of  that  time 
with  the  law  as  it  now  stands,  it  will  be  seen  that  it  has  been 
m.odified  in  some  important  respects.  Comparing  English  law  with 
French,  it  will  be  seen  that,  for  the  most  part,  where  they  differ, 
French  law  is  in  strict  accordance  with  the  rules  laid  down  by 
Beawes.  The  fact  is,  that  when  Beawes  wrote,  the  law  or  practice 
of  both  nations  on  this  subject  was  uniform.  The  French  law, 
however,  was  embodied  in  a  Code  by  the  "  Ordonnance  de  1673," 
which  is  amplified  but  substantially  adopted  by  the  Code  de  Com- 
merce of  1818.  Its  development  was  thus  arrested,  and  it  remains 
in  substance  what  it  was  200  years  ago.  English  law  has  been 
developed  piecemeal  by  judicial  decision  founded  on  custom.  The 
result  has  been  to  work  out  a  theory  of  bills  widely  different  from 
the  original.  The  English  theory  may  be  called  the  Banking  or 
Currency  theory,  as  opposed  to  the  French  or  Mercantile  theory. 
A  bill  of  exchange  in  it  origin  was  an  instrument  by  which  a  trade 
debt,  due  in  one  place,  was  transferred  in  another.  It  merely 
avoided  the  necessity  of  transmitting  cash  from  place  to  place.     This 

'  Bills  of  Exchange  Act  (1882),  §  73. 
'  45  &  46  Vic.  c.  61. 


148  THE    LAW    MERCHANT.  [ART.  I. 

theory  the  French  law  steadily  keeps  in  view.  In  England  bills  have 
developed  into  a  perfectly  fle.Kible  paper  currency.  In  France  a  bill 
represents  a  trade  transaction;  in  England  it  is  merely  an  instru- 
ment of  credit.'  English  law  gives  full  play  to  the  system  of 
accommodation  paper;  French  law  endeavors  to  stamp  it  out. 
A  comparison  of  some  of  the  main  points  of  divergence  between 
English  and  French  law  will  show  how  the  two  theories  are  worked 
out.  In  England  it  is  no  longer  necessary  to  express  on  a  bill  that 
value  has  been  given,  for  the  law  raises  a  presumption  to  that  effect. 
In  France  the  nature  of  the  value  must  be  expressed,  and  a  false 
statement  of  value  avoids  the  bill  in  the  hands  of  all  parties  with 
notice.  In  England  a  bill  may  now  be  drawn  and  payable  in  the 
same  place  (formerly  it  was  otherAvise,  see  the  definition  of  bill  in 
Comyns'  Digest).'  In  France  the  place  where  a  bill  is  drawn  must 
be  so  far  distant  from  the  place  where  it  is  payable,  that  there  may 
be  a  possible  rate  of  exchange  between  the  two.  A  false  statement 
of  places,  so  as  to  evade  this  rule,  avoids  the  bill  in  the  hands  of  a 
holder  with  notice.  As  French  lawyers  put  it,  a  bill  of  exchange 
necessarily  presupposes  a  contract  of  exchange.'  In  England,  since 
1765,  a  bill  may  be  drawn  payable  to  bearer,  though  formerly  it  was 
otherwise.*  In  France  it  must  be  payable  to  order;  if  it  were  not  so, 
it  is  clear  that  the  rule  requiring  the  consideration  to  be  expressed 
would  be  an  absurdity.  In  England  a  bill  originally  payable  to  order 
becomes  payable  to  bearer  when  indorsed  in  blank.  In  France  an  in- 
dorsement in  blank  merely  operates  as  a  procuration.  An  indorsement, 
to  operate  as  a  negotiation,  must  be  an  indorsement  to  order,  and 
must  state  the  consideration ;  in  short,  it  must  conform  to  the  con- 
ditions of  an  original  draft.  In  England,  if  a  bill  be  refused  accept- 
ance, a  right  of  action  at  once  accrues  to  the  holder.  This  is  a 
logical  consequence  of  the  currency  theory.  In  France  no  cause  of 
action  arises  unless  the  bill  is  again  dishonored  at  maturity;  the 
holder,  in  the  meantime,  is  only  entitled  to  demand  security  from 
the  drawer  and  indorsers.  In  England  a  sharp  distinction  is  drawn 
between  current  and   overdue  bills.     In  France  no  such  distinction 

'  This  passage  was  written  in  187S,  when  the  first  edition  was  published. 
The  theory  it  advances  is  independently  confirmed  by  the  excellent  introduction 
to  the  Portuguese  Commercial  Code  in  the  French  edition,  published  by  the 
Comite  de  Legislation  ]Etranglre.     See  p.  xxix. 

'  "  A  bill  of  exchange  is  when  a  man  takes  money  in  one  country  or  city 
upon  exchange,  and  draws  a  bill  whereby  he  directs  another  person  in  another 
country  or  city  to  pay  so  much  to  A.  or  order  for  value  received  of  B.,  and  sub- 
scribes it." 

3  This  rule  is  said  to  be  now  obsolete  ;   but  the  Code  remains  unaltered. 

*  See  Stewart  v.  Hodges  (1692),  12  Mod.  36. 


III.   2.]  HISTORY   OF   NEGOTIABLE    INSTRUMENTS.  149 

is  drawn.  In  England  no  protest  is  required  in  the  case  of  an  inland 
bill,  notice  of  dishonor  alone  being  sufficient.  In  France  every 
dishonoured  bill  must  be  protested.  Grave  doubts  may  exist  as  to 
whether  the  English  or  the  French  system  is  the  soundest  and  most 
beneficial  to  the  mercantile  community,  but  this  is  a  problem  which 
it  is  beyond  the  province  of  a  lawyer  to  attempt  to  solve. 


(/^)   Other   JVegottable  Paper. 

ScRUTTON,  Elements  of  Mercantile  Law.     1S91. 

\Ffoin  Chapter  II ^ 

There  are,  hov.-ever,  other  negotiable  instruments  besides  those 
which  have  been  dealt  with  by  the  Act  of  18S2,  and  to  such  instru- 
ments the  rules  of  the  Common  Law  and  the  customs  of  the  Law 
Merchant  are  still  applicable.  Fresh  usages  may  be  introduced,  or  new 
documents  may  be  proved  by  the  usage  of  merchants  to  have  the  two 
marks  of  negotiability  already  stated.'  The  usage  that  is  proved 
must,  however,  be  a  usage  of  English  merchants.  In  the  case  of 
Picker  v.  The  London  and  County  Bank,"^  an  attempt  was  made  to 
treat  certain  Prussian  bonds  as  negotiable  instruments  in  England; 
but  the  only  evidence  that  was  offered  was  that  those  bonds  were 
negotiable  by  the  custom  of  Prussian  merchants,  and  the  Court 
unanimously  rejected  the  evidence  as  insufficient.  As  it  was  pointedly 
put,  the  fact  that  in  Africa  cowries  are  negotiable  instruments  does 
not  therefore  bind  the  English  Courts  to  accept  cowries  as  negotiable 
instruments  in  England,  and  the  same  principle  has  always  been 
applied  in  any  attempt  to  prove  the  negotiability  of  instruments  in 
England;  the  usage  proved  must  be  a  usage  of  English  merchants. 
It  is  not  necessary  that  that  usage  should  be  from  time  immemorial. 
Mr.  Justice  Blackburn  did,  indeed,  in  one  case  ^  lay  down  that  such 
a  usage,  existing  as  part  of  the  ancient  Law  Merchant  was  neces- 
sary; but  in  the  later  case,  Goodwin  v.  Robarfs,^  both  the  Court  of 
Appeal  and  the  House  of  Lords  held  that  to  be  too  narrow  a  limita- 
tion, deciding  that  the  Law  Merchant  might  be  added  to  by  proof  of 
recent  usage,  and  thus  that  new  negotiable  instruments  might  be 
from  time  to  time  created.  We  find  in  the  Reports  a  series  of  illus- 
trations of  these  principles  of  law  in  the  various  documents  that  have 

'  Ante,  p.  26.     [Herein  pp.  142-3.  —  Ed. 
•=iSQ.  B.  D.  p.  515- 

*  Crouch  V.  Credit  Fonder,  L.  R.  S  O.  B.  374,  followed  on  this  by  Manisty.  J.. 
in  20  Q.  B.  D.  at  p.  239, 

•*  L.  R.  10  Ex.  at  p.  355;   i  App.  C.  at  p.  494. 


I50  THE    LAW    MERCHANT,  [ART.   I. 

been  from  time  to  time  proved  or  not  proved  to  be  negotiable  instru- 
ments. For  instance,  in  the  case  of  Glynn  v.  Baker ^^  East  India 
bonds  were  held  not  to  be  negotiable  in  the  absence  of  any  evidence 
that  they  customarily  passed  by  delivery;  but  the  decision  in  the 
Courts  was  immediately  remedied  by  Parliament,  who  passed  an 
Act  giving  to  East  India  bonds  the  character  of  negotiability."  In 
Dixon  V.  Bovill,^  a  document  called  an  "iron  warrant,"  running. 
"  I  will  deliver  one  hundred  tons  of  iron  when  required  after  Sept. 
i8th  to  the  party  lodging  this  document  with  me,"  was  held  by  the 
House  of  Lords  not  to  be  a  negotiable  instrument,  and  not  therefore 
to  pass  by  delivery,  there  being  no  evidence  before  the  Court  of  any 
mercantile  usage  affecting  such  documents;  it  is,  however,  very 
probable  that  if  the  question  of  iron  warrants  came  before  the 
Court  at  the  present  day,  they  could  be  abundantly  proved  to  be 
negotiable. 

To  come  to  more  recent  cases,  in  The  Fine  Arts  Society  v.  T/ie 
Union  Bank,^  it  was  held  that  Post  Office  orders  crossed  for  collec- 
tion by  a  bank  were  not  negotiable  instruments;  and  in  Crouch  y. 
The  Credit  Fonder,^  dQ.h&nt\ire  bonds  of  an  English  company  were 
held  not  negotiable  because  the  only  proof  of  usage  tendered  was 
one  originating  in  the  last  twenty  years.  On  the  other  hand,  in 
Gorgier  v.  Mieville^^  certain  foreign  bonds  were  held  to  be  negotia- 
ble instruments  on  proof  that  bonds  of  that  description  were  sold  in 
the  English  market,  and  passed  from  hand  to  hand  daily  like 
Exchequer  bills.  And  that  case  was  followed  in  Goodivin  v.  Robarts^'' 
in  which  certain  scrip,  which  on  the  payment  of  all  instalments  due 
was  to  be  exchanged  for  bonds,  was  held  a  negotiable  instrument 
on  proof  of  usage  of  the  English  Stock  Exchange.-  There  is 
one  other  case  I  wish  to  mention  to  you  as  an  illustration  of  the  Com- 
mon Law  maxim  I  have  already  reminded  you  of,  that  a  man  cannot 
give  what  he  has  not  got,  and  therefore  if  he  has  not  got  a  title 
cannot  give  it.  The  recent  case  of  Barton  v.  The  London  and  North 
Western  Railway'^  is  at  the  present  time  exciting  very  great  apprehen- 

'  13  East,  509. 

251  Geo.  III.  c.  64. 

^3  Macqueen's  Reports,  p.  I. 

^lyQ.  B.  D.  705. 

^L.  R.  8  O.  B.  D.  374. 

«3B.  &C.  45- 

■>  L.  R.  10  Ex. 

*  For  recent  cases  in  which  the  question  of  negotiability  was  raised  see  Lord 
Sheffield  v.  London  Joint  Stock  Bank,  L.  R.  13  App.  C.  333,  and  Colonial  Bank 
V.    ]]'iHiams,  15  App.  C.  p.  267. 

»L.  R.  24Q.  B.  D.  77. 


III.  2  ]  HISTORY   OF   NEGOTIABLE    INSTRUMENTS,  15I 

sion  in  commercial  circles.  Mr.  Barton  held  certain  shares  in  the  L.  & 
N.  W.  Railway  which  passed  to  his  executors,  and  one  of  the  execu- 
tors by  forging  the  signature  of  the  other  executor  sold  those  shares 
some  twelve  or  thirteen  years  ago.  The  purchaser  took  the  transfer 
with  the  forged  signature  to  the  L.  &  N.  W.  Railway  Company, 
who  registered  it,  and  for  the  twelve  or  thirteen  years  the  pur- 
chaser has  been  registered  for  those  shares' and  has  received  the 
dividends.  The  executrix  whose  signature  was  forged  —  ^or  a  lady 
was  concerned  —  did  not  find  out  the  absence  of  these  shares  for  the 
thirteen  years,  but  on  finding  it  out  and  on  proof  of  the  forgery, 
the  L.  &  N.  W.  Company  were  ordered  to  replace  her  name  on  the 
register,  and  the  unfortunate  purchasers  have  had  to  give  up  their 
shares,  and  to  pay  back  the  dividends  which  they  have  received 
during  the  thirteen  years.  A  man  cannot  give  what  he  has  not  got. 
The  people  who  purported  to  pass  these  shares  had  not  got  them 
to  give.  At  present  agitation,  if  one  may  use  such  a  word,  is  taking 
place  on  every  English  Stock  Exchange  for  an  Act  which  will  pro- 
tect the  people  whose  transfers  have  been  registered  by  Railway 
Companies  against  the  rules  of  the  Common  Law. 


GOODWIN  r.  ROB  ARTS. 

L.  R.  10  Exchequer,  337. — 1875. 

CocKBURN,  C.  J.  — The  question  for  our  decision  in  this  case  is 
whether  certam  scrip  issued  by  the  authority  of  the  Russian  Govern- 
ment, and  certain  other  scrip  issued  by  the  authority  of  the  Austro- 
Hungarian  Government,  is  a  negotiable  security  for  money,  so  that 
the  transfer  of  it  by  a  person  not  being  the  true  owner  to  a  bona  fide 
holder,  for  value,  can  confer  a  good  title  on  the  latter. 

The  scrip  in  question  was  bought  by  the  plaintiff  through  one 
Clayton,  a  stock  broker,  and  was  allowed  to  remain  in  Clayton's 
hands,  who  unlawfully  pledged  it  with  the  defendants,  who  are 
bankers,  as  security  for  a  loan  of  money.  Clayton  having  become 
bankrupt,  and  having  absconded,  the  defendants  sold  the  scrip  at 
the  market  price  of  the  day,  and  the  plaintiff  brings  his  action  to 
recover  the  amount  realized  on  such  sale. 

[The  scrip  was  issued  by  Messrs.  de  Rothschild  as  agents  of  the 
Russian  and  the  Austro-Hungarian  governments,  and  the  essential 
part  of  it  was  as  follows:] 

Received  the  sum  of  twenty  pounds,  being  the  first  instalment  of  20  per  cent. 
upon  one  hundred  pounds  stock,  and  on  payment  of  the  remaining  instalments 


152  THE   LAW    MERCHANT.  [ART.  I. 

at  the  period  specified,  the  bearer  will  be  entitled  to  receive  a  definitive  bond  or 
bonds  for  one  hundred  pounds  after  receipt  thereof  from  the  Imperial  Govern- 
ment. 

[Then  follow  other  receipts  for  20/.  each,  making  up  the  100/.,  for  which  the 
bond  is  afterwards  to  be  given.] 

The  contention  on  the  part  of  the  plaintiff  was  that  scrip  of  this 
description  not  coming  under  the  category  of  any  of  the  securities 
for  money  which,  by  the  law  merchant,  are  capable  of  being  trans- 
ferred by  indorsement  or  delivery  —  indeed,  not  being  a  security  for 
money  at  all,  but  only  for  the  future  delivery  of  a  bond  — the  right 
of  the  true  owner  could  not  be  divested  by  the  fraudulent  transfer 
of  the  chattel  by  a  person  who  had  no  title  as  against  the  owner. 

On  the  part  of  the  defendants  it  was  contended  that  the  finding 
as  to  general  usage  brought  the  case  within  the  decisions  in  Gorgier 
V.  Mieville,  (3  B.  &  C.  45)  and  Attonuy-General  v.  Boiiwens  (4  M. 
&  W.  171).     *     *     * 

Strenuous  efforts  were  made  by  ]\Ir.  Benjamin,  in  his  able  argu- 
ment on  behalf  of  the  plaintiff,  to  distinguish  the  present  case  from 
Gorgier  v.  Mieville.  *  *  *  The  substance  of  Mr.  Benjamin's 
argument  is,  that,  because  the  scrip  does  not  correspond  with  any 
of  the  forms  of  the  securities  for  money  which  have  been  hitherto 
held  to  be  negotiable  by  the  law  merchant,  and  does  not  contain  a 
direct  promise  to  pay  money,  but  only  a  promise  to  give  security  for 
money,  it  is  not  a  security  to  which,  by  the  law  merchant,  the 
character  of  negotiability  can  attach. 

Having  given  the  fullest  consideration  to  this  argument,  we  are 
of  opinion  that  it  cannot  prevail.  It  is  founded  on  the  view  that 
the  law  merchant  thus  referred  to  is  fixed  and  stereotyped,  and 
incapable  of  being  expanded  and  enlarged  so  as  to  meet  the  wants 
and  requirements  of  trade  in  the  varying  circumstances  of  commerce. 
It  is  true  that  the  law  merchant  is  sometimes  spoken  of  as  a  fixed 
body  of  law,  forming  part  of  the  common  law,  and  as  it  were  coeval 
with  it.  But  as  a  matter  of  legal  history,  this  view  is  altogether 
incorrect.  The  law  merchant  thus  spoken  of  with  reference  to 
bills  of  exchange  and  other  negotiable  securities,  though  forming 
part  of  the  general  body  of  the  lex  mercatoria,  is  of  compara- 
tively recent  origin.  It  is  neither  more  nor  less  than  the  usages 
of  merchants  and  traders  in  the  different  departments  of  trade, 
ratified  b^  the  decisions  of  courts  of  law,  which,  upon  such  usages 
being  proved  before  them,  have  adopted  them  as  settled  law  with 
a  view  to  the  interests  of  trade  and  the  public  convenience,  the 
court  proceeding  herein  on  the  well-known  principle  of  law  that, 
with  reference  to  transactions  in  the  different  departments  of  trade, 


III.  2.]  HISTORY   OF   NEGOTIABLE   INSTRUMENTS.  1 53 

courts  of  law,  in  giving  effect  to  the  contracts  and  dealings  of  the 
parties,  will  assume  that  the  latter  have  dealt  with  one  another  on 
the  footing  of  any  custom  or  usage  prevailing  generally  in  the  par- 
ticular department.  By  this  process,  what  before  was  usage  only, 
unsanctioned  by  legal  decision,  has  become  engrafted  upon,  or  incor- 
porated into,  the  common  law,  and  may  thus  be  said  to  form  a  part 
of  it.  "  When  a  general  usage  has  been  judicially  ascertained  and 
established,"  says  Lord  Campbell,  in  Bratidao  v.  Burnett  (12  CI.  & 
F.  at  p.  S05)  "  it  becomes  a  part  of  the  law  merchant,  which  courts 
of  justice  are  bound  to  know  and  recognize." 

Bills  of  exchange  are  known  to  be  of  comparatively  modern  origin, 
having  first  been  brought  into  use,  so  far  as  is  at  present  known, 
by  the  Florentines  in  the  twelfth,  and  by  the  Venetians  about  the 
thirteenth  century.     The  use  of  them  gradually  found  its  way  into 
France,  and,  still  later  and  but  slowly,  into   England.     We  find  it 
stated  in  a  law  tract,  by  Mr.   MacLeod,  entitled  "  Specimen  of  a 
Digest  of  the  Law  of  Bills  of  Exchange,"  printed,  we  believe,  as  a 
report  to  the  government,  but  which,  from  its  research  and  ability, 
deserves  to  be  produced  in  a  form  calculated  to  insure  a  wider  cir- 
culation, that  Richard  Malynes,  a  London  Merchant,  who  published 
a  work   called  the   Lex  Mercatoria,  in  1622,   and   who   gives   a   full 
account  of  these   bills  as  used   by   the   merchants  of   Amsterdam, 
Hamburg,  and  other  places,  expressly  states  that  such  bills  were  not 
used  in  England.     There  is  reason  to  think,  however,  that  this  is  a 
mistake.      Mr.    MacLeod  shows  that  promissory  notes,   payable  to 
bearer,   or   to  a  man  and  his  assigns,  were  known    in  the  time  of 
Edward  IV.     Indeed,  as  early  as  the  statute  of  3  Rich.  2,  c.  3,  bills 
of  exchange  are  referred  to  as  a  means  of  conveying  money  out  of 
the  realm,  though  not  as  a  process  in  use  among  English  merchants. 
But  the  fact  that  a  London  merchant  writing  expressly  on  the  law 
merchant    was    unaware    of   the   use   of  bills   of    exchange   in    this 
country,  shows  that  that  use  at  the  time  he  wrote  must  have  been 
limited.     According  to  Professor  Story,    who  herein  is,  no  doubt, 
perfectly  right,  "  the  introduction  and   use  of  bills  of  exchange  in 
England,"  as  indeed  it  was  everywhere  else,  "  seems  to  have  been 
founded  on  the  mere  practice  of  merchants,  and   gradually  to  have 
acquired  the  force  of  custom."     With  the  development  of  English 
commerce  the  use   of  these   most  convenient  instruments  of  com- 
mercial traffic  would  of  course  increase,  yet,  according  to  Mr.  Chitty, 
the  earliest  case  on  the  subject  to  be  found  in  the  English  books  is 
that  of  Martin  v.  Boure  (Cro.  Jac.  6),  in  the  first  James  I.      Up  to 
this  time  the  practice  of  making  these  bills  negotiable  by  indorse- 
ment had  been  unknown,  and  the  earlier  bills  are  found  to  be  made 


154  THE   LAW    MERCHANT  [ART.   I. 

payable  to  a  man  and  his  assigns,  though  in  some  instances  to 
bearer.  But  about  this  period,  that  is  to  say,  at  the  close  of  the 
sixteenth  or  the  commencement  of  the  seventeenth  century,  the 
practice  of  making  bills  payable  to  order,  and  transferrmg  them 
by  indorsement,  took  its  rise.  Hartmann,  in  a  very  learned  work  on 
Bills  of  Exchange,  recently  published  in  Germany,  states  that  the 
first  known  mention  of  the  indorsement  of  these  instruments  occurs 
in  the  Neapolitan  Pragmatica  of  1607.  Savary,  cited  by  Mons. 
Nouguier,  in  his  work,  "  Des  Lettres  de  Change,"  had  assigned  to 
it  a  later  date,  namely  1620.  From  its  obvious  convenience  this 
practice  speedily  came  into  general  use,  and,  as  part  of  the  general 
custom  of  merchants,  received  the  sanction  of  our  courts.  At  first 
the  use  of  bills  of  exchange  seems  to  have  been  confined  to  foreign 
bills  between  English  and  foreign  merchants.  It  was  afterwards 
extended  to  domestic  bills  between  traders,  and  finally  to  bills  of  all 
persons,  whether  traders  or  not.     (See  Chitty  on  Bills,  8th  ed.,  p.  13.) 

In  the  meantime,  promissory  notes  had  also  come  into  use,  differ- 
ing herein  from  bills  of  exchange  that  they  were  not  drawn  upon  a 
third  party,  but  contained  a  simple  promise  to  pay  by  the  maker, 
resting,  therefore,  upon  the  security  of  the  maker  alone.  They 
were  at  first  made  payable  to  bearer,  but  when  the  practice  of  mak- 
ing bills  of  exchange  payable  to  order,  and  making  them  transferable 
by  indorsement,  had  once  become  established,  the  practice  of  making 
promissory  notes  payable  to  order,  and  of  transferring  them  by 
indorsement,  as  had  been  done  with  bills  of  exchange,  speedily  pre- 
vailed. And  for  some  time  the  courts  of  law  acted  upon  the  usage 
with  reference  to  promissory  notes,  as  well  as  with  reference  to  bills 
of  exchange. 

In  1680,  in  the  case  of  Sheldefi  v.  Hentley  (2  Show.  160),  an  action 
was  brought  on  a  note  under  seal  by  which  the  defendant  promised 
to  pay  to  bearer  100/.,  and  it  was  objected  that  the  note  was  void 
because  not  made  payable  to  a  specific  person.  B.ut  it  was  said  by 
the  Court,  ''  Traditio  facit  chariavi  loqiit,  and  by  the  delivery  he 
(the  maker)  expounds  the  person  before  meant;  as  when  a  merchant 
promises  to  pay  to  the  bearer  of  the  note,  anyone  that  brings  the  note 
shall  be  paid."  Jones,  J.,  said  that  "it  was  the  custom  of  mer- 
chants that  made  that  good."  In  Broimvich  v.  Lloyd {2  Lutw.  1582), 
the  plaintiff  declared  upon  the  custom  of  merchants  in  London,  on 
a  note  for  money  payable  on  demand,  and  recovered;  and  Treby, 
C.  J.,  said  that  "  bills  Oi  exchange  were  originally  between  foreigners 
and  merchants  trading  with  the  English;  afterwards,  when  such 
bills  came  to  be  more  frequent,  then  they  were  allowed  between 
merchants  trading  ?n  England,  and  afterwards  between  any  traders 


III.  2,]  HISTORY   OF   NEGOTIABLE   INSTRUMENTS.  I55 

whatsoever,  and  now  between  any  persons,  whether  trading  or  not; 
and,  therefore,  the  plaintiff  need  not  allege  any  custom,  for  now 
those  bills  were  of  that  general  use  that  upon  an  indebitatus  assump- 
sit they  may  be  given  in  evidence  upon  the  trial."  To  which 
Powell,  J.,  added,  "  On  indebitatus  assumpsit  for  money  received 
to  the  use  of  the  plaintiff  the  bill  may  be  left  to  the  jury  to  deter- 
mine whether  it  was  given  for  value  received." 

In  Williams  v.  Williams  (Carth.  269),  where  the  plaintiff  brought 
his  action  as  indorsee  against  the  payee  and  indorser  of  a  promissory 
note,  declaring  on   the   custom   of  merchants,    it  was  objected  on 
error,  that  the    note  having  been  made  in  London,  the  custom,  if 
any,   should    have    been    laid    as    the    custom   of   London.     It   was 
answered  "  that  this  custom  of  merchants  was  part  of  the  common 
la\v,  and  the  court  would  take  notice  of  \V  ex  officio;  and,  therefore,  it 
was  needless  to  set  forth  the  custom  specially  in  the  declaration,  but 
it  was  sufficient  to  say  that  such  a  person  secundum  usum   et  consue- 
tudinum  mercatorum,  drew  the  bill."  And  the  plaintiff  had  judgment. 
Thus  far  the  practice  of  merchants,  traders,  and  others,  of  treat- 
ing promissory  notes,  whether  payable  to  order  or  bearer,   on  the 
same  footing  as  bills  of  exchange  had  received  the  sanction  of  the 
courts,  but  Holt  having  become  Chief  Justice,  a  somewhat  unseemly 
conflict  arose  between  him  and  the  merchants  as  to  the  negotiability 
of  promissory  notes,   whether  payable   to  order  or  to  bearer,   the 
Chief  Justice  taking  what  must  now  be  admitted  to  have  been  a 
narrow-minded  view  of  the  matter,  setting  his  face  strongly  against 
the  negotiability  of  these  instruments,  contrary,  as  we  are  told  by 
authority,  to   the  opinion   of  Westminster   Hall,  and  in  a  series  of 
successive  cases,  persisting  in  holding  them  not  to  be  negotiable  by 
indorsement  or  delivery.     The  inconvenience  to  trade  arising  there- 
from led  to  the  passing  of  the  statute  of  3  and  4  Anne,  c.  9,  whereby 
promissory  notes  were  made  capable  of  being  assigned  by  indorse- 
ment, or  made  payable  to  bearer,   and   such  assignment  was  thus 
rendered  valid  beyond  dispute  or  difficulty. 

It  is  obvious  from  the  preamble  of  the  statute,  which  merely  recites 
that  "  it  had  been  held  that  such  notes  were  not  within  the  custom  of 
merchants,"  that  these  decisions  were  not  acceptable  to  the  pro- 
fession or  the  country.  Nor  can  there  be  much  doubt  that  by  the 
usage  prevalent  amongst  merchants,  these  notes  had  been  treated 
as  securities  negotiable  by  the  customary  method  of  assignment  as 
much  as  bills  of  exchange  properly  so-called.  The  Statute  of  Anne 
may.  indeed,  practically  speaking,  be  looked  upon  as  a  declaratory 
statute,  confirming  the  decisions  prior  to  the  time  of  Lord  Holt. 
We  now  arrive  at  an  epoch  when  a  new  form  of  security  for  money, 


156  THE   LAW    MERCHANT.  [ART.  I. 

namely,  goldsmiths'  or  bankers'  notes,  came  into  general  use. 
Holding  them  to  be  a  part  of  the  currency  of  the  country,  as  cash, 
Lord  Mansfield  and  the  Court  of  King's  Bench  had  no  difficulty  in 
holding,  in  Miller  v.  Race  (i  Burr.  452),  that  the  property  in  such 
a  note  passes,  like  that  in  cash,  by  delivery,  and  that  a  party  taking 
it  bona  fide,  and  for  value,  is  consequently  entitled  to  hold  it  against 
a  former  owner  from  whom  it  has  been  stolen. 

In  like  manner  it  was  held,  in  Collins  v.  Martin  (i  B.  &  P.  648), 
that  where  bills  indorsed  in  blank  had  been  deposited  with  a  banker, 
to  be  received  when  due,  and  the  latter  had  pledged  them  with 
another  banker  as  security  for  a  loan,  the  owner  could  not  bring 
trover  to  recover  them  from  the  holder. 

Both  these  decisions  of  course  proceeded  on  the  ground  that  the 
property  in  the  bank-note  payable  to  bearer  passed  by  delivery,  that 
in  the  bill  of  exchange  by  indorsement  in  blank,  provided  the  acqui- 
sition had  been  made  bona  fide. 

A  similar  question  arose  in  Wookey  v.  Pole  (4  B.  &  Aid.  i),  in 
respect  of  an  exchequer  bill,  notoriously  a  security  of  modern  growth. 
These  securities  being  made  in  favor  of  blank  or  order,  contained 
this  clause,  "  If  the  blank  is  not  filled  up  the  bill  will  be  paid  to 
bearer."  Such  an  exchequer  bill,  having  been  placed,  without  the 
blank  being  filled  up,  in  the  hands  of  the  plaintiff's  agent,  had  been 
deposited  by  him  with  the  defendants,  on  a  bona  fide  advance  of 
money.  It  was  held  by  three  judges  of  the  Queen's  Bench,  Bayley, 
J.,  dissentiente,  that  an  exchequer  bill  was  a  negotiable  security, 
and  judgment  was  therefore  given  for  the  defendants.  The  judg- 
ment of  Holroyd,  J.,  goes  fully  into  the  subject,  pointing  out  the 
distinction  between  money  and  instruments  which  are  the  representa- 
tives of  money,  and  other  forms  of  property.  "The  courts,"  he 
says,  "  have  considered  these  instruments,  either  promises  or  orders 
for  the  payment  of  money,  or  instruments  entitling  the  holder  to  a 
sum  of  money,  as  being  appendages  to  money,  and  following  the 
nature  of  their  principal."  After  referring  to  the  authorities,  he 
proceeds:  "These  authorities  shew  that  not  only  money  itself 
may  pass,  and  the  right  to  it  may  arise,  by  currency  alone,  but 
further,  that  these  mercantile  instruments,  which  entitle  the  bearer 
of  them  to  money,  may  also  pass,  and  the  right  to  them  may  arise, 
in  like  manner,  by  currency  or  delivery.  These  decisions  proceed 
upon  the  nature  of  the  property  (/.  c.  money),  to  which  such  instru- 
ments give  the  right,  and  which  is  in  itself  current,  and  the  effect 
of  the  instruments,  which  either  give  to  their  holders,  merely  as 
such,  a  right  to  receive  the  money,  or  specify  them  as  the  persons 
entitled  to  receive  it." 


III.  2.]  HISTORY    OF   NEGOTIABLE   INSTRUMENTS.  1 57 

Another  very  remarkable  instance  of  the  efficacy  of  usage  is  to  be 
found  in  much  more  recent  times.  It  is  notorious  that,  with  the 
exception  of  the  Bank  of  England,  the  system  of  banking  has  recently 
undergone  an  entire  change.  Instead  of  the  banker  issuing  his  own 
notes  in  return  for  the  money  of  the  customer  deposited  with  him,  he 
gives  credit  in  account  to  the  depositor,  and  leaves  it  to  the  latter  to 
draw  upon  him,  to  bearer  or  order,  by  what  is  now  called  a  cheque. 
Upon  this  state  of  things  the  general  course  of  dealing  between  bank- 
ers and  their  customers  has  attached  incidents  previously  unknown, 
and  these  by  the  decisions  of  the  courts  have  become  fixed  law.  Thus, 
while  an  ordinary  drawee,  although  in  possession  of  funds  of  the 
drawer,  is  not  bound  to  accept,  unless  by  his  own  agreement  or  con- 
sent, the  banker,  if  he  has  funds,  is  bound  to  pay  on  presentation  of 
a  cheque  on  demand.  Even  admission  of  funds  is  not  sufficient  to 
bind  an  ordinary  drawee,  while  it  is  sufficient  with  a  banker;  and 
money  deposited  with  a  banker  is  not  only  money  lent,  but  the 
banker  is  bound  to  repay  it  when  called  for  by  the  draft  of  the  cus- 
tomers. (See  Pott\.  Clegg,  16  M.  &  W.  321.)  Besides  this,  a  custom 
has  grown  up  among  bankers  themselves  of  marking  checks  as  good 
for  the  purposes  of  clearance,  by  which  they  become  bound  to  one 
another. 

Though  not  immediately  to  the  present  purpose,  bills  of  lading 
may  also  be  referred  to  as  an  instance  of  how  general  mercantile 
usage  may  give  effect  to  a  writing  which  without  it  would  not  have 
had  that  effect  at  common  law.  It  is  from  mercantile  usage,  as 
proved  in  evidence,  and  ratified  by  judicial  decision  in  the  great  case 
of  Lickbarroiv  v.  Mason  (2  T.  R.  63),  that  the  efficacy  of  bills  of 
lading  to  pass  the  property  in  goods  is  derived.' 

It  thus  appears  that  all  these  instruments  which  are  said  to  have 
derived  their  negotiability  from  the  law  merchant  had  their  origin, 
and  that  at  no  very  remote  period,  in  mercantile  usage,  and  were 
adopted  into  the  law  by  our  courts  as  being  in  conformity  with  the 
usages  of  trade;  of  which,  if  it  were  needed,  a  further  confirmation 
might  be  found  in  the  fact  that,  according  to  the  old  form  of 
declaring  on  bills  of  exchange,  the  declaration  always  was  founded 
on  the  custom  of  merchants. 

Usage,  adopted  by  the  courts,  having  been  thus  the  origin  of  the 
whole  of  the  so-called  law  merchant  as  to  negotiable  securities,  what 
is  there  to  prevent  our  acting  upon  the  principle  acted  upon  by  our 
predecessors,  and  followed  in  the  precedents  they  have  left  to  us? 


1  See  Shaw  v.  Railroad,  loi  U.  S.  557,  as  to  statutory  "  negotiability  "  of  bills 
of  lading.  — Ed. 


158  THE   LAW   MERCHANT.  [ART.  I. 

Why  is  it  to  be  said  that  a  new  usage  which  has  sprung  up  under 
altered  circumstances  is  to  be  less  admissible  than  the  usages  of  past 
times?  Why  is  the  door  to  be  now  shut  to  the  admission  and  adop- 
tion of  usage  in  a  matter  altogether  of  cognate  character,  as  though 
the  law  had  been  fully  stereotyped  and  settled  by  some  positive  and 
peremptory  enactment?  It  is  true  that  this  scrip  purports  on  the 
face  of  it  to  be  a  security  not  for  money,  but  for  the  delivery  of  a 
bond;  nevertheless  we  think  that  substantially  and  in  effect  it  is  a 
security  for  money,  which,  till  the  bond  shall  be  delivered,  stands  in 
the  place  of  that  document,  which,  when  delivered,  will  be  beyond 
doubt  the  representative  of  the  sum  it  is  intended  to  secure.  Sup- 
pose the  possible  case  that  the  borrowing  government,  after  receiv- 
ing one  or  two  instalments,  were  to  determine  to  proceed  no  further 
with  its  loan,  and  to  pay  back  to  the  lenders  the  amount  they  had 
already  advanced;  the  scrip  with  its  receipts  would  be  the  security 
to  the  holders  for  the  amount.  The  usage  of  the  money  market  has 
solved  the  question  whether  scrip  should  be  considered  security  for, 
and  the  representative  of,  money,  by  treating  it  as  such. 

The  universality  of  a  usage  voluntarily  adopted  between  buyers 
and  sellers  is  conclusive  proof  of  its  being  in  accordance  with  public 
convenience;  and  there  can  be  no  doubt  that  by  holding  this  species 
of  security  to  be  incapable  of  being  transferred  by  delivery,  and  as 
requiring  some  more  cumbrous  method  of  assignment,  we  should 
materially  hamper  the  transactions  of  the  money  market  with  respect 
to  it,  and  cause  great  public  inconvenience.  No  doubt  there  is  an 
evil  arising  from  the  facility  of  transfer  by  delivery,  namely,  that  it 
occasionally  gives  rise  to  the  theft  or  misappropriation  of  the  security, 
to  the  loss  of  the  true  owner.  But  this  is  an  evil  common  to  the 
whole  body  of  negotiable  securities.  It  is  one  which  may  be  in  a 
great  degree  prevented  by  prudence  and  care.  It  is  one  which  is 
counterbalanced  by  the  general  convenience  arising  from  facility  of 
transfer,  or  the  usage  would  never  have  become  general  to  make 
scrip  available  to  bearer,  and  to  treat  it  as  transferable  by  delivery. 
It  is  obvious  that  no  injustice  is  done  to  one  who  has  been  fraudu- 
lently dispossessed  of  scrip  through  his  own  misplaced  confidence,  in 
holding  that  the  property  in  it  has  passed  to  a  bona  fide  holder  for 
value,  seeing  that  he  himself  must  have  know  that  it  purported  on 
the  face  of  it  to  be  available  to  bearer,  and  must  be  presumed  to 
have  been  aware  of  the  usage  prevalent  with  respect  to  it  in  the 
market  in  which  he  purchased  it. 

Lastly,  it  is  to  be  observed  that  the  tendency  of  the  courts,  except 
only  in  the  time  of  Lord  Holt,  has  been  to  give  effect  to  mercan- 
tile usage  in  respect  to  securities  for  money,  and  that  where  legal 


III.  2.]  HISTORY   OF   NEGOTIABLE    INSTRUMENTS.  1 59 

difficulties  have  arisen,  the  legislature  has  been  prompt  to  give  the 
necessary  remedy,  as  in  the  case  of  promissory  notes  and  of  East 
India  bonds. 

The  authorities  relied  on  on  the  part  of  the  plamtiff  do  not  appear 
to  us  materially  to  conflict  with  this  view.  [The  Court  then  dis- 
cusses: Glyn  V.  Baker  (13  East,  509) ;  Partridge  v.  Goirrnor  and  Com- 
pany of  the  Bank  of  England  (9  Q.  B.  396);  Dixon  v.  Bo7un  (3  Macq. 
l);  Crouch  v.  The  Credit  Foncier  of  England  (L.  R.  8  Q.  B.  374);  Lang 
V.  Smith  (7  Bing.  284).] 

We  must  by  no  means  be  understood  as  saying  that  mercantile 
usage,  however  extensive,  should  be  allowed  to  prevail  if  contrary 
to  positive  law,  including  in  the  latter  such  usages  as,  having  been 
made  the  subject  of  legal  decision,  and  having  been  sanctioned  and 
adopted  by  the  courts,  have  become,  by  such  adoption,  part  of  the 
common  law.  To  give  effect  to  a  usage  which  involves  a  defiance 
or  disregard  of  the  law  would  be  obviously  contrary  to  a  fundamental 
principle.  And  we  quite  agree  that  this  would  apply  quite  as 
strongly  to  an  attempt  to  set  up  a  new  usage  against  one  which  has 
become  settled  and  adopted  by  the  common  law  as  to  one  in  conflict 
with  the  more  ancient  rules  of  the  common  law  itself.  Thus  it  has 
been  decided  in  the  two  cases  of  More  v.  Manning  (i  Comyns'  Rep. 
311),  and  Acheson  v.  Fountain  (i  Str.  557),  that  when  a  bill  of 
exchange  was  endorsed  to  A.  B.,  without  the  words  "  or  order,"  the 
bill  was  nevertheless  assignable  by  A.  B.,  by  further  indorsement; 
Lord  Mansfield  and  the  Court  of  King's  Bench  in  the  case  of  Edie 
V.  The  East  India  Co?npany  (2  Burr.  i2t6),  held  that  evidence  of  a 
contrary  usage  was  inadmissible.  In  like  manner  in  Grant  v. 
Vaughan  (3  Burr.  15 16),  where  a  cash  note,  payable  to  bearer,  had 
been  lost  by  the  owner  but  had  been  taken  by  the  plaintiff  bona  fide 
for  value,  on  an  action  on  the  note  by  the  latter  against  the  maker. 
Lord  Mansfield  having  left  it  to  the  jury  to  say  "  whether  such  drafts 
as  this,  when  actually  paid  away  in  the  course  of  trade  dealing  and 
business,  were  negotiable  or  in  fact  and  practice  negotiable,"  and 
the  jury,  influenced  no  doubt  by  the  natural  desire  to  protect  the 
owner  of  the  note,  having  found  for  the  defendant,  Lord  Mansfield 
and  the  court  here  again  set  the  verdict  aside,  on  the  ground  that, 
the  law  having  been  settled  by  former  decisions  that  notes  payable 
to  bearer  passed  by  delivery  to  a  bona  fide  holder,  the  judge  ought 
to  have  directed  a  verdict  for  plaintiff. 

If  we  could  see  our  way  to  the  conclusion  that,  in  holding  the 
scrip  in  question  to  pass  by  delivery,  and  to  be  available  to  bearer, 
we  were  giving  effect  to  a  usage  incompatible  either  with  the  com- 
mon law  or  with  the  kiw  merchant  as  incorporated  into  and  embodied 


l6o  THE   LAW    MERCHANT.  [ART.  I. 

in  it,  our  decision  would  be  a  very  different  one  from  that  which  we 
are  about  to  pronounce.  But  so  far  from  this  being  the  case,  we 
are,  on  the  contrary,  in  our  opinion,  only  acting  on  an  established 
principle  of  that  law  in  giving  legal  effect  to  a  usage,  now  become 
universal,  to  treat  this  form  of  security,  being  on  the  face  of  it 
expressly  made  transferable  to  bearer,  as  the  representative  of 
money,  and  as  such,  being  made  to  bearer,  as  assignable  by  delivery. 
This  being  the  conclusion  at  which  we  have  arrived,  the  judgment 
of  the  Court  of  Exchequer  will  be  affirmed. 

Judgment  affirmed.' 

'  See  also  on  the  subject  of  negotiable  instruments,  other  than  bills,  notes 
and  checks,  Chalmers'  Bills  of  Exchange  Act  (5th  ed.),  pp.  312-327;  2  Ames' 
Cases  on  Bills  and  Notes,  pp.  74S-7S4;  2  Daniel  on  Neg.  Inst.,  pp.  496-595,  730- 
785.  — Ed. 


ARTICLE    II. 

Form  and  Interpretation. 
(2)  Form  Required. 
I.  Writing  and  signature. 
§  20  GEARY  V.  PHYSIC.  [§  i] 

5  Barnewall  &  Creswell  (K.  B.),  234.  —  1826. 

Assumpsit  by  the  plaintiff  as  indorsee  against  the  defendant  as 
maker  of  a  promissory  note  for  the  sum  of  30/.  payable  two  months 
after  date  to  the  order  of  one  Folder,  and  indorsed  by  him,  Folder, 
to  one  Kemp,  who  subsequently  indorsed  the  note  to  the  plaintiff. 
At  the  trial  before  Abbott,  C.  J.,  at  the  London  sittings  after  Hilary 
term,  1S25,  it  appeared  that  the  indorsement  by  Kemp  to  the  plain- 
tiff was  in  pencil,  and  it  was  thereupon  objected  that  the  plaintiff 
could  not  recover;  an  indorsement /«^^//rz7  not  being  such  an  indorse- 
ment as  the  law  and  custom  of  merchants  recognizes  to  be  sufficient 
to  pass  the  interest  in  a  bill  of  exchange,  and  promissory  notes  being 
by  the  statute  3  and  4  Ann,  c.  9,  §  i,  assignable  or  indorsable  in  the 
same  manner  as  unpaid  bills  of  exchange  are  according  to  the  custom 
of  merchants.  The  Lord  Chief  Justice  thought  it  sufficient,  and 
directed  the  jury  to  find  a  verdict  for  the  plaintiff,  reserving  liberty 
to  the  defendant's  counsel  to  move  to  enter  a  nonsuit,  if  the  court 
should  be  of  opinion  that  the  indorsement  of  the  promissory  note  in 
pencil  was  not  a  good  and  valid  indorsement. 

Abbott,  C.  J.  — There  is  no  authority  for  saying  that  where  the 
law  requires  a  contract  to  be  in  writing,  that  writing  must  be  in  ink. 
The  passage  cited  from  Lord  Coke  shows  that  a  deed  must  be 
written  on  paper  or  parchment,  but  it  does  not  show  that  it  must  be 
written  in  ink.  That  being  so,  I  am  of  opinion  that  an  indorsement 
on  a  bill  of  exchange  may  be  by  writing  in  pencil.  There  is  not  any 
great  danger  that  our  decision  will  induce  individuals  to  adopt  such 
a  mode  of  writing  in  preference  to  that  in  general  use.  The  imper- 
fection of  this  mode  of  writing,  its  being  so  subject  to  obliteration, 
and  the   impossibility  of  proving  it  when  it  is  obliterated,  will  pre- 

NEGOT.   INSTRUMENTS —  II  [l6l] 


l62  FORM    REQUIRED.  [ART.  II. 

vent  it  being  generally  adopted.  There  being  no  authority  to  show 
that  a  contract  which  the  law  requires  to  be  in  writing  should  be 
written  in  any  particular  mode,  or  with  any  specific  material,  and  the 
law  of  merchants  requiring  only  that  an  indorsement  of  bills  of 
exchange  should  be  in  writing,*  without  specifying  the  manner  with 
which  the  writing  is  to  be  made,  I  am  of  opinion  that  the  indorse- 
ment in  this  case  was  a  sufficient  indorsement  in  writing  within  the 
meaning  of  the  law  of  merchants,  and  that  the  property  in  the  bill 
passed  by  it  to  the  plaintiff. 

Bavley,  J.  —  I  think  that  a  writing  in  pencil  is  a  writing  within 
the  meaning  of  that  term  at  common  law,  and  that  it  is  a  writing 
within  the  custom  of  merchants.  I  cannot  see  any  reason  why, 
when  the  law  requires  a  contract  to  be  in  writing,  that  contract  shall 
be  void  if  it  be  written  in  pencil.  If  the  character  of  the  handwrit- 
ing were  thereby  wholly  destroyed,  so  as  to  be  incapable  of  proof, 
there  might  be  something  in  the  objection;  but  it  is  not  thereby 
destroyed,  for,  when  the  writing  is  in  pencil,  proof  of  the  character 
of  the  handwriting  may  still  be  given.  I  think,  therefore,  that  this 
is  a  valid  writing  at  common  law,  and  also  that  it  is  an  indorsement 
according  to  the  usage  and  custom  of  merchants;  for  that  usage  only 
requires  that  the  indorsement  should  be  in  writing,  and  not  that 
that  writing  should  be  made  with  any  specific  materials. 

Holroyd,  J.,  concurred. 

Rule  discharged.' 


§  20  REG.  V.  HARPER.  [§  l] 

L.  R.  7  Queen's  Bench  Division,  78.  — 1881. 
\^Court  for  Crown  Cases  Reserved. '\ 

Indictment  for  forging  an  indorsement  to  a  bill  of  exchange.  John 
Watson  &  Son  drew  a  bill  on  Harper,  but  did  not  sign  it.  Harper 
accepted  it,  forged  the  indorsement  of  John  Hunt,  and  returned  it. 
Watson  and  Son  indorsed  it  and  placed  it  in  bank  for  collection. 


*  See  custom  stated  in  Lutwyche,  S78. 

'  Accord:  Brown  v.  Butchers,  etc..  Bank,  6  Hill  (N.  Y.)  443, /^J-/,  p.  164  ;  Closson 
V.  Stearns,  4  Vt.  II ;  Reed  \ .  Roark,  14  Tex.  329.  Where  an  acceptance  of  a  bill 
is  required  bj' statute  to  be  in  writing  (Neg.  Inst.  L.,  g  220  [132]),  a  telegraphic 
acceptance  satisfies  the  statute.  Garrcttson  v.  Xorth  Atchison  Bank,  39  Fed.  Rep. 
163;  47  Fed.  Rep.  867;   51  Fed.  Rep.  168. 

A  negotiable  instrument  may  be  drawn  in  any  language.  Re  J/arset//es  Co., 
L.  R.  30  Ch.  D.  598.  —  Ed. 


I.]  WRITING   AND    SIGNATURE.  1 63 

They  did  not  at  any  time  sign  it  as  drawers.     The  following  is  a 
copy  of  the  bill: 

£22  los.  4d.  Kilmarnock,  2  Nov.  iSSo. 

One  month  after  date  pay  to  me  or  order  the  sum  of  ;^22,  los.  4d.,  that  being 
for  value  received  in  machinery. 

To  Mr.  J.  Harper,  Etc. 

[Across  the  face]:  Accnt-  d  payable  at  the  Union  Bank  of  London.  John 
Harper. 

[Indorsed]:  JoHN  Hunt.        John  Watson  &  Son. 

Harper  was  convicted  and  sentenced,  but  execution  of  the  sentence 
was  suspended  till  the  decision  of  the  case  by  the  Court  for  Crown 
Cases  Reserved. 

Lord  Coleridge,  C.  J. — The  conviction  cannot  be  sustained. 
The  instrument  was  not  a  bill  of  exchange;  it  was  an  inchoate  bill 
of  exchange.  The  point  requires  no  authority,  though  it  has  the 
authority  of  the  cases  of  McCall  v.  Taylor  (34  L.  J.  C.  P.  365); 
Stoessiger  \.  South  Eastern  Ry.  Co.  (3  E.  &  B.  549);  Peto  \ .  Reynolds 
(23  L.  J.  Ex.  98;  9  Ex.  410-,  II  Ex.  418);  and  Rex  v.  Pateman  (Russ 

&  Ry-  455)- 

Stephen,  J. —  Though  I  entirely  agree  with  the  opinion  expressed 
by  my  Lord,  I  cannot  help  observmg  that  the  act  of  the  prisoner 
has  all  the  effect  of  a  forgery  punishable  under  the  statute  as  a 
felony;  the  prisoner  could,  however,  have  been  indicted,  and  ought 
to  have  been  indicted,  for  forgery  at  common  law. 

Grove,  Hawkins  and  Lopes,  JJ.,  concurred. 

Conviction  quashed.' 


§  20  TAYLOR  V.  DOBBINS.  [§  l] 

I  Strange  (K.  B.),  399. —  1720. 
In  Case  upon  a  promissory  note  the  declaration  ran,  that  the 
defendant  made  a  note,  et  manu  sua  propria  scripsit.  Exception  was 
taken,  that  since  the  statute  he  should  have  said  that  the  defendant 
signed  the  note,  but  the  Court  held  it  well  enough,  because  laid  to 
be  wrote  with  his  own  hand,  and  there  needs  no  subscription  in  that 
case,  for  it  is  sufficient  his  name  is  in  any  part  of  it.  I.  J.  S.  promise 
to  pay,  is  as  good  as  I  promise  to  pay,  subscribed  /.  S.*"" 


'  Accord:  Tevis  v.  Young,  i  Mete.  (Ky.)  197:  Hemati  v.  Francisco,  12  Mo. 
App.  560.  —  Ed. 

*    Vide  Eliot  v.  Cowper,  i  Strange,  609. 

'  Accord:  Quinv.  Sterne,  26  Ga.  223.  The  courts  make  a  clear  distinction  be- 
tween the  statutory  requirement  that  an  instrument  shall  be  "  signed  "  and 
the  requirement  that  it  shall  be  "  subscribed."— /awf J  v.  Fatten,  6  N.  Y.  9.  —  Ed. 


164  FORM    REQUIRED.  [ART.  II. 

§  20  BROWN  V.  BUTCHERS  &  DROVERS'  BANK  [§  l] 

6  Hill  (N.  Y.).  443.  —  184 

On  Error  from  the  Superior  Court  of  the  city  of  New  York,  where 
the  Butchers  and  Drovers'  Bank  sued  Brown  as  the  indorser  of  a  bill 
of  exchange,  and  recovered  judgment.  The  indorsement  was  made 
with  a  lead  pencil,  and  in  figures,  thus,  "  i.  2.  8."  no  name  being 
written.  Evidence  was  given  strongly  tending  to  show  that  the 
figures  were  in  Brown's  handwriting,  and  that  he  meant  they  should 
bind  him  as  indorser;  though  it  also  appeared  he  could  write.  The 
court  below  charged  the  jury  that,  if  they  believed  the  figures  upon 
the  bill  were  made  by  Brown,  as  a  substitute  for  his  proper  name, 
intending  thereby  to  bind  himself  as  indorser,  he  was  liable. 
Exception.  The  jury  found  a  verdict  for  the  plaintiffs  below,  on 
which  judgment  was  rendered,  and  Brown  thereupon  brought  error. 

By  the  Court,  Nelson,  Ch.  J.  —  It  has  been  expressly  decided  that 
an  indorsement  written  in  pencil  is  sufficient;  [Geary  v.  Physic,  5 
Barn.  &  Cress.  234);  and  also  that  it  may  be  made  by  a  mark. 
{George  v.  Surrey,  i  Mood.  &  Malk.  516).  In  a  recent  case  in  the 
K.  B.  it  was  held  that  a  mark  was  a  good  signing  within  the  statute 
of  frauds;  and  the  court  refused  to  allow  an  inquiry  into  the  fact 
whether  the  party  could  write,  saying  that  would  make  no  difference. 
{Biker  v.  Deni/ig,  8  Adol.  &  Ellis,  94;  and  see  Harrison  v.  Harrison, 
8  Ves.  186;  Aiidy  v.  Grix,  id.  504.) 

These  cases  fully  sustain  the  ruling  of  the  court  below.  They 
show,  I  think,  that  a  person  may  become  bound  by  any  mark  or 
designation  he  thinks  proper  to  adopt,  provided  it  be  used  as  a  sub- 
stitute for  his  name,  and  he  intend  to  bind  himself.* 

Judgment  affirmed. 


11.  Unconditional  promise  or  order  to  pay  a  sum  certain  in  money. 

I.  A  Note  Must  Contain  a  Promise. 

§  20  GAY  V.  ROOKE.  [§  i] 

151  Massachusetts,  115.  —  1890. 

Contract  on  the  following  instrument,  declared  on  as  a  promis- 
sory note: 

Marlboro',  Sept.   23,   1S81.  I.  O.  U.,  E.  A.  Gay,  the  sum  of  seventeen 

dolls.  5-100  for  value  received.  John  R.  Rooke. 

Writ  dated  September  19,  1887.  At  the  trial  in  the  Superior  Court, 
without  a  jury,  before  Dewey,  J.,  the  only  issue  was  whether  the 

*  See  Hogers  v.  Coit,  6  Hill,  322,  3. 


II.   I.J  NOTE    MUST    COXTAIX    A    PROMISE.  1 65 

plaintiff  was  entitled  to  interest  from  the  date  of  the  instrument,  or 
from  that  of  the  writ,  the  service  of  which  was  the  only  demand 
made  by  the  plaintiff. 

The  plaintiff  asked  the  judge  to  rule,  as  a  matter  of  law,  that  he  was 
entitled  to  interest  from  the  date  of  the  instrument.  The  judge 
declined  so  to  rule,  and  ruled  that  interest  could  be  recovered  from 
the  date  of  the  writ  only,  and  found  for  the  plaintiff  for  $17.05  only; 
and  the  plaintiff  alleged  exceptions. 

Devens,  J.  —  In  order  to  constitute  a  good  promissory  note  there 
should  be  an  express  promise  on  the  face  of  the  instrument  to  pay 
the  money.  A  mere  promise  implied  by  law,  founded  on  an 
acknowledged  indebtedness,  will  not  be  sufficient.  {Story,  Prom. 
Notes,  §  14;  Bf-own  v.  Gibnaii,  13  Mass.  158.)  While  such  promise 
need  not  be  expressed  in  any  particular  form  of  words,  the  language 
used  must  be  such  that  the  written  undertaking  to  pay  may  fairly 
be  deduced  therefrom.  (Commonwealth  Ins.  Co.  v.  Whitney,  i  Met. 
21.)  In  this  view  the  instrument  sued  on  cannot  be  considered  a 
promissory  note.  It  is  an  acknowledgment  of  a  debt  only,  and, 
although  from  such  an  acknowledgment  a  promise  to  pay  may  be 
legally  implied,  it  is  an  implication  from  the  existence  of  the  debt, 
and  not  from  any  promissory  language.  Something  more  than 
this  is  necessary  to  establish  a  written  promise  to  pay  money.  It 
was  therefore  held  in  Gray  v.  Bowden  (23  Pick.  282),  that  a  memo- 
randum on  the  back  of  a  promissory  note,  in  these  words,  "  I 
acknowledge  the  within  note  to  be  just  and  due,"  signed  by  the 
maker  and  attested  by  a  witness,  was  not  a  promissory  note  signed 
in  the  presence  of  an  attesting  witness  within  the  meaning  of  the 
statute  of  limitations.  In  England  an  I.  O.  U.,  there  being 
no  promise  to  pay  embraced  therein,  is  treated  as  a  due  bill  only. 
The  cases,  which  arose  principally  under  the  Stamp  Act,  are  very 
numerous,  and  they  have  held  that  such  a  paper  did  not  require  a 
stamp,  as  it  was  only  evidence  of  a  debt,  (i  Danl.  Neg.  Inst.  3d 
ed.  §  36;  I  Randolph.,  Com.  Paper,  §  88;  Fesenmayer  v.  Adcock,  16  M. 
&  W.  449 ;  Melanottex.  Teasdale,  13  M.  &  W.  216;  S7nith  v.  Smith, 
I  F.  &  F.  539;  Gould  \.  Coombs,  i  C.  B.  543;  Fisher  v.  Leslie,  i  Esp. 
425;  Israel  X.  Israel,  1  Camp.  499;  Chillers  v.  Boulnois,  Dowl.  &  Ry. 
N.  P.  8;  Beeching  v.   Westbrook,  8  M.  &  W.  411.) 

While  in  a  few  States  it  has  been  held  otherwise,  the  law  as  gen- 
erally understood  in  this  country  is,  that,  in  the  absence  of  any 
statute,  a  mere  acknowledgment  of  a  debt  is  not  a  promissory  note, 
and  such  is,  we  think,  the  law  of  this  Commonwealth.  {Gray  v. 
Bo^vden,  23  Pick.  282;  Commonwealth  Ins.  Co.  v.  Whitney,  i  Met.  21; 
Daggett  V.  Daggett,    124    Mass.    149;  Almy   v.    Winslo'w,    126    Mass. 


l66  FORM    REQUIRED.  [ART.  II. 

342;  Carson  v.  Lucas,  13  B.  Mon.  (Ky.)  213;  Garland  v.  Scott,  15 
La.  Ann.  143;  Currier  v.  Lockjuood,  40  Conn.  349;  Brenzer  v.  Wight- 
maft,  7  Watts  &  Serg.  264;  Biskup  v.  O^^/V^,  6  Mo.  App.  563.) 
Some  States  have  by  statute  extended  the  law  of  bills  and  promissory 
notes  to  all  instrume-^.ts  in  writing  whereby  any  person  acknowledges 
any  sum  of  money  to  be  due  to  any  other  person,  (i  Randolph,  Com. 
Paper,  §  88;  Rev.  Sts.  III.  1884,  c.  98,  §  3;  Gen.  Sts.  Col.  1883,  c.  9, 
§  3;  Rev.  Sts.  Ind.  1881,  §  5501;  Code,  Iowa,  1873,  §  2085;  Rev.  Code 
Miss.  1880,  §§  1 1 23,  1 1 24.) 

We  have  no  occasion  to  comment  upon  those  instruments  in  which 
words  have  been  used  or  superadded  from  which  an  intention  to 
accompany  the  acknowledgment  with  a  promise  to  pay  has  been 
gathered,  or  where  the  form  of  the  instrument  fairly  led  to  that  con- 
clusion. {Daggett  Y.  Daggett,  124  Mass.  149;  Almy  v.  Winsloiv,  126 
Mass.  342.)  No  such  words  exist  in  the  instrument  sued,  nor  is  it 
in  form  anything  but  an  acknowledgment.  The  words  "  for  value 
received  "  recite  indeed  the  consideration,  but  they  add  nothing 
which  can  be  interpreted  as  a  promise  to  pay.  It  is  therefore 
unnecessary  to  consider  whether,  if  the  paper  were  a  promissory 
note,  interest  should  be  calculated  from  its  date.  Upon  this  point 
we  express  no  opinion.'  If  it  is  to  be  treated  as  an  acknowledgment 
of  debt  only,  as  we  think  it  must  be,  the  plaintiff  is  not  entitled  to 
interest  except  from  the  date  of  the  writ.  Even  if  it  was  the  duty 
of  the  defendant  to  have  paid  the  debt  on  demand,  yet  if  no  demand 
was  made,  if  no  time  was  stipulated  for  its  payment,  if  there  was  no 
contract  or  usage  requiring  the  payment  of  interest,  and  if  the 
defendant  was  not  a  wrongdoer  in  acquiring  or  detaining  the  money, 
interest  should  be  computed  only  from  the  demand  made  by  the 
service  of  the  writ.  [Dodge  v.  Perkins,  9  Pick.  368;  Hunt  v.  A^evers, 
15  Pick.  500.)  "  In  general,"  says  Chief  Justice  Shaw,  "  when 
there  is  a  loan  w'ithout  any  stipulation  to  pay  interest,  and  where 
one  has  the  money  of  another,  having  been  guilty  of  no  wrong  in 
obtaining  il,  and  no  default  in  retaining  it,  interest  is  not  charge- 
able." [Hubbard  v.  Charlestown  Railroad,  ii  Met.  124;  Calton  v. 
Bragg,  15  East.,  222;  Shaiv  v.  Picton,  4  B.  &  C.  715;  Moses  v.  Mac- 
ferlan,  2  Burr.  1005;    Walker  \.  Constable,  i  Bos.  &:  P.  306.) 

Exceptions  overruled. 

'  It  seems  that  in  the  case  of  a  negotiable  instrument  payable  on  demand,  no 
interest  being  reserved,  interest  will  run  only  from  the  date  of  demand.  Siovil 
v.  Scovil,  45  Barb.  (N.  Y.)  517;  Herrick  v.  IVoolvcrton,  41  N.  Y.  581;  Zielx.  Dukes, 
12  Calif.  479.  But  bringing  an  action  constitutes  demand.  Pierce  v,  Fother;^ill, 
2  Bing.  N.  C.  167;  Bank  v.  Davidson,  70  N.  Car.  118.  See  g  12,0  \j6\,  post,  and 
cases.  —  Ed. 


II.   I.]  NOTE   MUST   CONTAIN   A   PROMISE.  167 

§  20  SMITH  v.  ALLEN.  [§  i] 

5  Day,  (Conn.)  337.  —  1812. 

This  was  an  action  of  assumpsit^  originally  brought  by  the  defend- 
ant in  error,  against  the  plaintiffs  in  error. 

The  declaration  was  of  the  following  tenor,  viz.  "  For  that  the 
defendants,  in  and  by  a  certain  writing  or  note,  under  their  hands, 
by  them  well  executed,  dated  the  30th  day  of  August,  A.  D.  1808, 
promised  the  plaintiff  to  pay  to  him,  for  value  received,  the  sum  of 
ninety-four  dollars,  ninety-one  cents,  on  demand;  which  is  in  the 
words  following: 

Due  John  Allen  ninety-four  dollars,  91   cents,  on  demand. 
Litchfield,  August  30th,  iSoS.  Joseph  L.  Smith,  Seth  P.  Beers. 

"  Now  the  plaintiff  further  says,  that  the  defendants,  their  promise 
aforesaid  not  regarding,  have  never  performed  the  same,"  etc., 
"  which  is  to  the  damage  of  the  plaintiff  the  sum  of  100  dollars,"  etc. 

To  this  there  was  a  demurrer;  and  the  Supreme  Court  adjudged 
the  declaration  sufficient,  and  rendered  judgment  for  the  plaintiff, 
for  III  dollars,  99  cents,  and  costs;  and  to  reverse  this  judgement, 
the  present  writ  of  error  was  brought. 

Smith,  J.  —  This  was  a  writ  of  error,  brought  by  the  defendants 
in  the  court  below,  to  reverse  a  judgment  rendered  against  them  in 
that  court. 

The  declaration  was  in  common  form,  in  assumpsit,  counting  upon 

a  promissory  note,  and  demanding  $100  damages.     To  this,  there 

was  a  demurrer  and  joinder  in  demurrer.    The  writing  counted  upon, 

and  recited  in  the  declaration,  was  of  the  following  tenor,  viz. 

Due  John  Allen  ninety-four  dollars,  91  cents,  on  demand. 

Joseph  L.  Smith, 

Seth  P.  Beers. 
Litchfield,  August  2,0,  1808. 

The  court  below  adjudged  the  declaration  to  be  sufficient  and 
rendered  judgment  for  the  phintiff,  to  recover  11 1  dollars,  99  cents, 
damages. 

On  inspection  of  the  record,  it  appears  that  judgment  was 
rendered  for  a  larger  sum  than  is  warranted  by  law,  and  therefore, 
on  that  ground,  is  clearly  erroneous,  and  must  be  reversed. 

But  still,  the  question  arises,  whether  this  cause  shall  be  remanded 
to  the  Superior  Court  ?  The  decision  of  this  question  depends  upon 
the  sufficiency  or  insufficiency  of  the  plaintiff's  declaration :  Because, 
if  the  instrument  on  which  the  action  is  brought,  and  which  is 
recited  in  the  declaration,  will  not  sustain  it,  it  will  be  useless  to  send 
the  cause  back  for  farther  trial. 


l68  FORM    REQUIRED.  [ART.  II. 

On  this  subject,  in  my  view,  it  is  very  clear,  that  where  a  writing 
contains  nothing  more  than  a  bare  acknowledgment  of  a  debt,  it 
does  not,  in  legal  construction,  import  an  express  promise  to  pay. 
It  would  not  appear,  from  such  a  writing,  that  the  parties  intended 
the  debt  should  be  paid.  Their  meanmg  might  be,  in  such  case, 
merely  to  settle  their  accounts,  in  writing,  with  a  view  to  further 
dealings. 

But  where  a  writing  imports  not  only  the  acknowledgment  of  a 
debt,  but  an  agreement  to  pay  it,  this  amounts  to  an  express 
contract. 

From  the  writing  in  question,  it  is  perfectly  manifest  that  the 
debt  acknowledged  to  be  due  was  to  be  paid  on  demand,  as  fully, 
as  if  the  words  "to  be  paid  "  or  "  which  we  promise  to  pay,"  had 
been  inserted  next  before  the  words  "  on  demand." 

I  think,  therefore,  that  the  declaration  is  sufficient;  and  that  the 
cause  ought  to  be  remanded  for  further  proceedings. 

The  other  judges  severally  concurred  in  this  opinion. 

[udgment  reversed,  and  the  cause  remanded.' 


§  20  [i]  Hegeman  V  Moon,  131  New  York,  462.  — 1892.  "  One 
year  after  my  death  I  hereby  direct  my  executors  to  pay  to  A.  B.,  etc., 
being  the  balance  due  him  for  cash  advanced,  etc."  Peckham,  J.  — 
"The  acknowledgment  of  the  indebtedness,  and  that  it  is  due,  im- 
plies a  promise  to  pay  it  on  demand.  It  is  a  promissory  note  within 
the  statute.  *  *  *  The  direction  is,  however,  in  the  nature  of  a 
promise  and  expresses  a  time  of  payment,  and,  therefore,  excludes 
the  presumption  that  it  is  payable  immediately,  which  would  other- 
wise arise  from  the  use  of  the  word  due.'' 


§20  [l]  ScHMiTZ  z'.  Hawkeye  Golp  Mining  Co.  (So.  Dak.),  67 
N.  W.  R.  618—1896.  "Time  Check,  No.  189.  $98.65.  General 
Managers'  Office,  Hawkeye  Gold  Mining  Company.  Pluma,  So. 
Dak.,  June  loth,  1893.  Due  W.  C.  Robinson  the  sum  of  ninety-eight 
dollars  and  sixty-five  cents  ($98.65),  payable  at  this  office,  on  the 
20th  day  of  June,  1893,  to  him  or  order.     David   Hunter,   General 

'  "  Due  A.  B.  $325  payable  on  demand,"  Kimball  v.  Huntington,  10  Wend. 
(N.  Y.)  675;  "  I.  O.  U.  £20  to  be  paid  on  the  22d  instant,"  Bi-ooks  v.  Elkins,  2 
Meeson  &  Welsby,  74,  accord.  "  Borrowed  this  day  of  A.  B.  p^ioo  for  one  or  two 
months;  check,  £\oo.  on  the  Naval  Bank,"  Hyne  v.  Dewdney,  21  Law  Journal, 
Q.  B.  278,  contra.  If  the  due  bill  have  words  of  negotiation  as  "  or  order"  or 
"  or  bearer,"  it  is  generally  held  to  be  a  promissory  note.  Russell  v.  Whipple,  2 
Cow.  (N.  Y.)  536;   Sackett  v,  Spcmcer,  29  Barb.  (N.  Y.)  180.  —  Ed. 


II.   I, J  NOTE   MUST   CONTAIN   A   PROMISE.  169 

Manager,  by  L.  A.  Fell.  W.  C.  Robinson."  [Indorsed]  "  W.  C. 
Robinson."  Fuller,  J.  —  "  As  the  writing  before  us  is  negotiable 
in  form,  and  the  signer,  in  legal  effect,  promises  to  pay  a  specified 
sum  of  money,  we  conclude  that  the  instrument  is  a  promissory 
note,  and  that  appellant's  [Robinson's]  liability  was  only  that  of 
an  indorser.  The  words  '  payable  to  W.  C.  Robinson  or  order,' 
unconditionally,  at  a  specified  time  and  place,  a  certain  amount  of 
money,  import  a  promise;  and  the  instrument  contains  every  essen- 
tial element  of  a  promissory  note.  *  *  *  There  was  no  allega- 
tion in  the  complaint  nor  proof  at  the  trial  by  which  to  charge 
appellant,  as  an  indorser  or  otherwise." 


§  20  [l]  HussEY  V.  WiNSLOw,  59  Maine,  170. —  1870.  "Nobleboro, 
Oct.  4,  1869.  Nathaniel  O.  Winslow,  Cr.  By  labor  i6f  days  @ 
$4  per  day,  $67.00.  Good  to  bearer.  William  Vannah."  Dan- 
FORTH,  J.  —  "It  would  seem  that  the  only  possible  construction 
which  can  be  given  to  this  instrument  is,  substantially,  this:  In 
consideration  of  i6|  days'  labor,  performed  by  Nathaniel  O.  Winslow, 
at  $4  per  day,  amounting  to  $67.00,  I  promise  to  pay  him,  or  bearer, 
that  sum  on  demand.  Signed,  William  Vannah,  Here  we  have 
every  element  of  a  negotiable  promissory  note;  a  maker,  a  payee,  a 
promise  or  engagement  to  pay  a  certain  sum  of  money  at  a  specified 
time,  absolutely  and  unconditionally,  and  the  word  bearer  to  make 
it  negotiable." 


§  20  [l]  Hammett  v.  Brown,  44  So.  Car.  397.  —  1895.  — 
(i)  "$3,530.  This  is  to  show  that  I  have  received  from  my  father,  as 
so  much  interest  in  his  estate,  a  tract  of  land  containing  353  acres, 
known  as  the  Gore's  Meeting  House  tract,  for  which  I  account  to 
the  estate  for  $3,530,  for  which  I  promise  to  pay  C.  B.  Hammett, 
during  his  lifetime,  seven  per  cent,  per  annum  interest,  to  begin 
the  ist  day  of  next  December,  then  the  interest  to  be  paid  the  ist 
day  of  each  December  thereafter,  which  is  value  received,  this  May 
28th,  1885.  (Signed)  Agnes  Brown.  Test.  J.  F.  Sloan."  (2) 
"This  is  to  show  that  my  father  has  advanced  me  $500  in  cash 
as  so  much  advanced  on  his  estate,  for  which  I  have  to  pay  interest 
annually  from  the  3d  day  of  May,  1884,  it  being  for  cash,  which  is 
value  received  this  28th  day  of  May,  1885.  (Signed)  Agnes  Brown. 
Test.  J.  F.  Sloan."  Mr.  Justice  Gary. — "Appellant's  first 
exception  complains  of  error  on  the  part  of  the  presiding  judge  in 
holding  and  charging  that  the  causes  of  action  sued  on  were  notes. 
This  was  substantially  the  decision  rendered  by  this  court  in  the 


lyo 


FORM    REQUIRED.  [ART. II. 


case  of  Hammdts.  Hammctt  (38  S.  C.  50).  This  exception  is,  there- 
fore overruled.  The  second  exception  complains  of  error  on  the 
part  of  the  presiding  judge  in  holding  and  charging  that  the  causes 
of  action  matured  at  the  death  of  testator.  The  instruments  of 
writing  show  that  the  presiding  judge  was  correct  in  so  charging, 
and  this  exception  is  also  overruled.  The  third  exception  complains 
of  error  on  the  part  of  the  presiding  judge  in  holding  and  charging 
that  the  causes  of  action  were  payable  to  the  estate  of  the  testator. 
We  do  not  see  how  it  can  even  admit  of  question  that  the  money 
was  due  to  the  estate  of  the  testator  in  the  absence  of  a  contrary 
showing.  This  exception  is  also  overruled.  The  fourth  exception 
complains  of  error  on  the  part  of  the  presiding  judge  in  holding  and 
charging  that  the  defendant  was  due  the  estate  the  principal  amount 
sued  for,  with  interest  from  the  death  of  the  testator.  We  agree 
with  the  Circuit  Judge  in  his  construction  of  the  instruments  of 
writing.     This  exception  is  also  overruled." 


§  20  CURRIER  V.  LOCKWOOD.  [§  l] 

40  Connecticut,  349.  —  1S73, 

Assumpsit  upon  a  written  instrument,  which  the  plaintiffs  claimed 
was  a  promissory  note,  non-negotiable,  and  was  not  barred  until 
seventeen  years  from  its  date.  The  trial  court  held  it  not  a  promis- 
sory note  and  that  it  was  barred  by  the  statute  of  limitations. 

Seymour,  C.  J.  —  The  first  question  in  this  case  is  whether  the 
writing  sued  upon  is  a  promissory  note  within  the  meaning  of  those 
words  in  the  statute  of  limitations.  The  statute  is  as  follows:  "  No 
action  shall  be  brought  on  any  bond  or  writing  obligatory,  contract 
under  seal,  or  promissory  note  not  negotiable,  but  within  seventeen 
years  next  after  an  action  shall  accrue."  The  instrument  sued 
upon  is  as  follows: 

Bridgeport,  Jan.  22nd,  1863,  $17.14.  Due  Currier  and  Barker  seventeen  dol- 
lars and  fourteen  cents,  value  received.  Frederick  Lockwood. 

Promissory  notes  not  negotiable  are  by  the  statute  above  recited 
put  upon  the  footing  of  specialties  in  regard  to  the  period  of  limita- 
tion, and  for  most  other  purposes  such  notes  have  been  regarded  as 
specialties  in  Connecticut.  The  instrument,  however,  to  which  this 
distinction  has  been  attached  is  the  simple  express  promise  to  pay 
money  in  the  stereotyped  form  familiar  to  all.  The  writing  given 
in  evidence  in  this  case  is  a  due  bill  and  nothing  more.  Such 
acknowledgments  of  debt  are  common  and  pass  under  the  name  of 


II.   I.]  NOTE    MUST   CONTAIN   A   PROMISE.  I/I 

due  bills.  They  are  informal  memoranda,  sometimes  here  as  in 
England  in  the  form  "  I.  O.  U."  They  are  not  the  promissory  notes 
which  are  classed  with  specialties  in  the  statute  of  limitations.  The 
law  implies  indeed  a  promise  to  pay  from  such  acknowledgments, 
but  the  promise  is  simply  implied  and  not  express.  It  is  well  said 
by  Smith,  J.,  in  Smith  v.  Allen  (5  Day,  337),  "  Where  a  writing  con- 
tains nothing  more  than  a  bare  acknowledgment  of  a  debt,  it  does 
not  in  legal  construction  import  an  express  promise  to  pay;  but 
where  a  writing  imports  not  only  the  acknowledgment  of  a  debt  but 
an  agreement  to  pay  it,  this  amounts  to  an  express  contract." 

In  that  case  the  words  "  on  demand  "  were  held  to  import  and  to 
be  an  express  promise  to  pay.  That  case  adopts  the  correct  prin- 
ciple, namely,  that  to  constitute  a  promissory  note  there  must  be  an 
express  as  contra-distinguished  from  an  implied  promise.  The 
words  "  on  demand  "  are  here  wanting.  The  words  "  value 
received,"  which  are  in  the  writing  signed  by  the  defendant,  cannot 
be  regarded  as  equivalent  to  the  words  "  on  demand."  The  case 
of  Smith  V.  Allen  went  to  the  extreme  limit  in  holding  the  writing 
there  given  to  be  a  promissory  note,  and  we  do  not  feel  at  liberty  to 
go  further  m  that  direction  than  the  court  then  went. 

The  writing  then  not  being  a  promissory  note,  the  plaintiff's  action 
is  barred  by  the  six  years'  clause  of  the  statute,  unless  revived  by  a 
new  promise  to  pay. 

A  new  trial  is  not  advised.* 

Park  and  Carpenter,  JJ.,  concur.  Foster  and  Phelps,  JJ., 
dissent. 


§  20  MILLER  V.  AUSTIN.  [§  i] 

13  Howard  (U.  S.)  218.  —  1851, 

Action  by  indorsee  against  indorser,  alleging  due  presentment, 
demand,  notice  and  protest.  Judgment  for  plaintiff.  Defendant 
brings  writ  of  error. 

Upon  the  trial,  the  plaintiff  offered  the  note  in  evidence,  together 
with  the  protest,  etc.  Objection  was  taken,  but  the  court  overruled 
it  and  admitted  the  evidence.  This  was  the  subject  of  the  first  bill 
of  exception. 

The  second  exception  was  to  the  refusal  of  the  court  to  grant 
certain  prayers  asked  for  by  the  defendant,  of  which  it  is  only  neces- 
sary to  notice  the  following: 

'  Conixa:  Jacijuin  v.  Warren,  40  111.  459;  Brady  v.  Chandler,  31  Mo.  28.  For 
criticism  of  Currier  v.  Lockwood,  see  14  Am.  L.  Reg.  N.  S.  20.  —  Ed. 


172  FORM    REQUIRED.  [ART.   II. 

ist.  That  the  paper  offered  in  evidence  is  not  a  negotiable  instru- 
ment under  the  laws  of  Ohio,  and  cannot  be  sued  on  by  the  plaintiff 
in  the  cause. 

6th.  That  said  paper  offered  in  evidence  is  not  a  promissory  note, 
nor  is  it  a  bill  of  exchange,  but  it  is  a  mere  certificate,  acknowledg- 
ing the  receipt  and  deposit  of  paper  or  obligations  of  some  kind, 
which  are  payable  twelve  months  after  ist  May,  1839,  bearing  interest 
at  the  rate  of  five  per  cent,  till  due. 

Mr.  Justice  Catron  delivered  the  opinion  of  the  court. 

The  only  question  this  case  presents  that  we  deem  worthy  of 
notice  is,  whether  the  paper  sued  on  is  a  negotiable  instrument;  it 
is  as  follows: 

No.  959.  Mississippi  Union  Bank, 

Jackson,  (Miss.)  Feb.  8,  1840.  I  hereby  certify,  that  Hugh  Short  has  de- 
posited in  this  bank,  payable  twelve  months  from  ist  May,  1S39,  with  5  per 
cent,  interest  till  due,  fifteen  hundred  dollars,  for  the  use  of  Henry  Miller,  and 
payable  only  to  his  order  upon  the  return  of  this  certificate,  $1,500. 

William  P.  Gr.-\.yson,  Cashier. 

The  suit  was  by  the  last  indorsee  against  his  immediate  indorser, 
and  brought  in  Ohio.  The  statute  of  that  State  declares  all  promis- 
sory notes,  drawn  for  a  sum  certain,  payable  to  any  person  or  order, 
or  to  any  person  or  his  assigns,  negotiable  by  indorsement. 

The  established  doctrine  is,  that  a  promise  to  deliver,  or  to  be 
accountable  for,  so  much  money,  is  a  good  bill  or  note.  Here  the 
sum  is  certain,  and  the  promise  direct.  Every  reason  exists  why 
the  indorser  of  this  paper  should  be  held  responsible  to  his  indorsee^ 
that  can  prevail  in  cases  where  the  paper  indorsed  is  in  the  ordinary 
form  of  a  promissory  note;  and  as  such  note,  the  State  courts  gen- 
erally, have  treated  certificates  of  deposit  payable  to  order;  and  the 
principles  adopted  by  the  State  courts  in  coming  to  this  conclusion, 
are  fully  sustained  by  the  writers  of  treatises  on  bills  and  notes. 
Being  of  opinion  that  the  Circuit  Court  properly  held  the  paper 
indorsed,  negotiable,  it  is  ordered  that  the  judgment  be  afiirmed.' 


1  Accord:  Pardee  v.  Fish,  60  N.  Y.  265;  Frank  v.  Wessels,  64  N.  V.  155; 
Bcardsley  v.  Webber,  104  Mich.  88;  Kirkwood  v.  First  Nat.  Bk.,  40  Neb.  484; 
Klanber  v.  Biggerstaff,  47  Wis.  551.  The  certificate  of  deposit  is  to  be  dis- 
tinguished from  the  "  deposit  slip,"  which  is  merely  a  receipt  or  memorandum, 
containing  no  promise,  and  requiring  no  return.  First  Nat.  Bk.  v.  Clark,  134 
N.  Y.  368,  372. 

For  orders  on  savings  banks,  see  White  v.  dishing,  88  Me.  339,  post,  p.  177.  — 
Ed. 


II.  2.]  BILL    MUST    CONTAIN   AN    ORDER.  173 

2.  A  Bill  Must  Contain  an  Order. 
§  20  HOYT  V.  LYNCH.  [§  l] 

2  Sandford's  Superior  Court  Rep.  (N.  Y.)  32S.  —  1849. 

Assumpsit  on  an  order  drawn  upon  the  defendant,  with  the  com- 
mon courts.  At  the  trial,  it  appeared  that  Smith  and  Woglom, 
builders,  erected  certam  buildings  for  the  defendant,  in  Williams- 
burgh,  in  1847.  The  plaintiff  claimed  to  have  tinned  the  roofs  and 
put  up  the  gutters  for  those  buildings,  and  his  bill  for  the  work, 
rendered  to  S.  &  W.,  amounted  to  $300.88.  They  gave  an  order  ou 
the  defendant,  written  at  the  foot  of  the  bill,  as  hereafter  set  forth. 
The  order  was  presented  by  one  Harris  to  the  defendant,  who  said 
he  could  not  pay  it  until  he  went  and  saw  how  the  buildings  pro- 
gressed. The  plaintiff  then  proved  by  Harris,  that  two  or  three 
days  afterwards  the  defendant  met  the  latter  at  the  buildings,  and 
there  promised  to  pay  the  order  as  soon  as  the  sashes  were  put  in, 
and  those  were  put  in  early  in  January,  1848. 

The  bill  and   order  were  read  in  evidence  in  these  words,  viz:  — 

New  York,  i6th  Dec,  1847. 
Messrs.  Smith  and  Woglom, 

To  C.  H.  HoYT,  Dr. 

To  tin  roof,  86  ft.  x  37  1-2  ft.  3225  ft.  @  7  1-2  c $241-87 

112  of  3  in.  leader 11.20 

85  ft.  of  copper  gutter,  4s  6d 47-8i 

$300.88 


Williamsburgh,  Dec.  16,  1847. 
Mr.  J.  Lynch 

Please  pay  the  above  bill,  being  the  amount  for  tinning  your  houses  on 
South  Sixth  street,  and  charge  the  same  to  our  account. 

And  much  oblige  yours, 

Smith  &  Woglom. 

By  the  Court.  Oakley,  Ch.  J. —  [After  disposing  of  another 
matter.]  There  was  another  question  argued,  which  must  arise  on 
a  new  trial,  and  it  is  right  that  we  should  express  our  views  upon  it 
at  this  time.  It  is  said  that  the  order  upon  which  the  suit  is  founded, 
is  a  bill  of  exchange,  and  that  there  is  no  written  acceptance  of  the 
same. 

On  consideration,  we  have  come  to  the  conclusion  that  this  is  a 
bill  of  exchange.  It  is  an  order  in  writing,  drawn  by  one  party  on 
another,  requesting  the  latter  to  pay  a  certain  sum  of  money  to  a 
third  party,  at  all  events;  depending  upon  no  contingency,  and  pay- 
able out  of  no   particular  fund.     It  comes  within  the  reason  of   the 


174  FORM    REQUIRED.  [ART.  II. 

statute  requiring  a  written  acceptance   to  charge  the  drawee.     It  is 

true  this  order  is  not  negotiable,  but  that  is  not  necessary  to  make 

it  a  bill  of  exchange.' 

New  trial  granted.'' 


§  20  [l]  The  King  7'.  Ellor,  i  Leach,  Crown  Law,  323.  —  1784. 
"  Messrs.  Songer,  —  Please  to  send  ^10  by  the  bearer,  as  I  am  so 
ill  I  cannot  wait  on  you.  Elizabeth  Wery."  Ellor  was  indicted 
for  forging  a  bill  of  exchange.  The  Court. —  "  This  appears  to  be 
a  mere  letter,  rather  requesting  the  loan  of  money  than  ordering  the 
payment  of  it.  The  terms  of  it  do  not  import  anything  compulsory 
on  the  part  of  the  drawee  to  pay  it." 


§  20  [l]  Regina  c'.  Bartlett,  2  Moody  &  Robinson,  362.  —  1841. 
"To  Mr.  G.  Peckford:  Please  to  pay  to  your  order  the  sum  of 
forty-seven  pounds  for  value  received.  J.  Bishop."  Indorsed: 
"  J.  Bishop."  Bartlett  was  indicted  for  forging  a  bill  of  exchange. 
It  was  objected  for  the  prisoner  that  this  could  not  be  called  a  bill 
of  exchange;  it  was  nothing  more  than  a  request  to  a  man  to  pay 
himself,  and  the  acceptance  of  such  a  document  laid  the  acceptor 
under  no  obligation  to  a  third  party.  "  Erskine,  J.,  said  he  should 
reserve  the  point  for  the  consideration  of  the  judges,  and  left  the 
case  to  the  jury,  who  convicted  the  prisoner;  and  he  was  sentenced 
to  transportation.  His  Lordship,  however,  afterwards  thought  the 
objection  so  clearly  valid,  that  he  did  not  submit  the  case  to  the 
judges,  but  recommended  a  pardon  for  the  offence." 


Commonwealth  v.  Butterick,  100  Mass.  12.  —  1868,  "Three 
months  after  date  pay  to  the  order  of  myself  eight  hundred  and  fifty 
dollars,  value  received,  and  charge  the  same  to  the  account  of  your 
obedient  servant,  J.  S.  Butterick.  To  J.  S.  Butterick,  Sterling 
Mass."  [On  the  face]:  "  Payable  at  the  Lancaster  N.  Bank,  J.  S. 
Butterick."  [Indorsed]:  "  J.  S.  Butterick."  "  J.  M.  Stevenson." 
Indictment  for  forging  the  name  of  J.  M.  Stevenson  to  a  bill  of 
exchange. 


1  See  Mehlher^  v.   Tisher,  24  Wis.  607.  post.  —  Ed. 

2  Norris  v.  Soloman,  2  Moody  &  Robinson,  266.-1840.  "  Mr.  Samuel  Solo- 
man;  Dr.  to  R.  Norris  [here  follows  a  statement  of  the  account].  Mr.  Solo- 
mon, —  Please  to  pay  the  above  account  to  Messrs.  Oliver  &  Son,  7  Lawrence 
Lane,  and  oblige,  yours  respectfully,  R.  Norris."  Maule,  J.  — "  I  am  of 
opinion  that  this  is  not  a  bill  of  exchange,  nor  anything  like  one."  —  Ed. 


II.  2.]  BILL    MUST   CONTAIN   AN   ORDER.  1/5 

Foster,  J.  —  "  Upon  principle,  as  well  as  by  the  authorities  cited 
by  the  attorney-general,  we  entertain  no  doubt  that  an  order  for 
the  payment  of  money,  drawn  by  one  in  his  own  favor  on  himself, 
and  by  himself  accepted  and  indorsed,  may  be  treated  as  a  bill  of 
exchange,  and  so  described  in  an  indictment.  Such  instruments  are 
well  known  in  commerce;  especially  in  the  case  of  mercantile  firms 
which  have  branches  in  different  cities,  all  composed  of  the  same 
partners.  Perhaps  such  a  bill  may  also  be  declared  upon  as  a  promis- 
sory note.  But  we  agree  with  the  court  of  Queen's  Bench  in  the 
latest  English  case  on  the  question,  decided  in  1852,  that  '  it  is  not 
unjust  to  presume  that  it  was  drawn  in  this  form  for  the  purpose  of 
suing  upon  it  either  as  a  promissory  note  or  a  bill  of  exchange.' 
[Lloyd  \.  Oliver,  iS  Q.  B.  471.)  It  is  sufficient  that  the  instrument 
was  in  the  form  of,  and  purported  to  be,  a  bill  of  exchange;  and 
the  defendant  might  be  convicted  of  forging  this  indorsement,  if  all 
the  other  names  were  also  forged  or  were  those  of  fictitious  per- 
sonaofes." 


§  20  [l]  Ruff  v.  Webb,  i  Espinasse,  129.  —  1794.  "Mr. 
Nelson  will  much  oblige  Mr.  Webb  by  paying  J.  Ruff,  or  order,  twenty 
guineas  on  his  account."  "Lord  Kenyon  said,  that  he  was  of 
opinion,  that  the  paper  offered  in  evidence  was  a  bill  of  exchange; 
that  it  was  an  order  by  one  person  to  another,  to  pay  money  to  the 
plaintiff  or  his  order,  which  was  in  point  of  form  a  bill  of  exchange," 


§20  [l]  Little  v.  Slackford,  Moody  &  Malkin,  171.  —  1828. 
"Mr.  Little:  —  Please  to  let  the  bearer  have  seven  pounds,  and 
place  to  my  account,  and  you  will  oblige,  your  humble  servant,  R, 
Slackford."  —  Lord  Tenterden,  C.  J.  —  "  The  paper  does  not  pur- 
port to  be  a  demand  made  by  a  party  having  a  right  to  call  on  the 
other  to  pay.  The  fair  meaning  is,  '  you  will  oblige  me  by  doing 
it.'"' 

'  "  Thomas  Williams,  Esq.  —  Please  let  the  bearer  have  $50.  I  will  arrange 
it  with  you  this  noon.  Yours,  most  obedient,  S.  R.  Biesenthall,"  was  held  to 
be  a  bill  of  exchange.  BiiSt'iithall  \.  JFilliains,  i  Duvall  (Ky.)  329,  1864.  Words 
of  civility  do  not  prevent  the  instrument  from  being  an  order.  IVhcatley  v. 
Strobe,  12  Cal.  92. 

By  the  law  merchant  a  bill  of  exchange  need  not  be  payable  to  order  or 
bearer,  or  have  the  words  value  received,  or  be  payable  at  a  day  certain  or  at 
any  particular  place.  Thus:  "  To  Hoxie  &  Rich:  Please  pay  to  Chas.  Mehlberg 
the  sum  of  $69.20,  and  charge  to  me.  Chas.  Tisher, "  is  a  bill  of  exchange  by 
the  law  merchant.     Mehlberg  v.  Tisher,  24  Wis.  607.     See  §  25  \(i\,  post.  —  Ed. 


176  FROM    REQUIRED.  [ART.  II. 

3.  The  Promise  or  Order  Must  Be  Unconditional. 

{a)   Conditional protnises  or  oj'ders  are  not  negotiable. 

§  20  BLAKE  V.  COLEMAN.  [§  l] 

22  Wisconsin,  396.  —  1868. 

Complaint  on  a  promissory  note;  answer,  a  general  denial.  On 
the  trial,  the  instrument  was  put  in  evidence,  and  was  on  its  face  a 
promissory  note  in  the  usual  form,  signed  by  defendant  and  run- 
ning to  plaintiff,  but  endorsed  thereon  were  the  following  words, 
without  date  or  signature:  "  The  conditions  of  the  within  note  are 
as  follows:  L.  S.  Blake  or  bearer  is  not  to  ask  or  expect  payment 
of  said  note  until  his,  Coleman's,  old  mill  is  sold  for  a  fair  price." 
This  was  admitted  in  evidence  against  defendant's  objection.  Defend- 
ant testified  that  the  indorsement  was  made  before  the  note  was 
signed;  that  the  note  was  given  for  a  fanning  mill  purchased  of 
plaintiff;  and  that  he  (defendant)  had  a  fanning  mill  on  hand  at  the 
time  he  gave  it.  Defendant  offered  to  show  by  parol  that  the  agree- 
ment was  that  plaintiff  should  dispose  of  the  old  mill,  and  that  it  had 
not  been  disposed  of,  but  was  still  in  defendant's  possession,  and 
plaintiff  had  never  demanded  it  nor  offered  to  dispose  of  it;  but  this 
evidence  was  rejected  as  tending  to  vary  the  terms  of  the  written 
instrument.  Judgment  for  the  plaintiff;  from  which  the  defendant 
appealed. 

Paine,  J.  —  The  court  below  erred  in  holding  that  the  instrument 
on  which  the  action  was  brought  was  not  affected  by  the  indorse- 
ment on  the  back,  but  was  admissible  as  a  mere  promissory  note. 
It  may  be  shown  by  parol  that  the  indorsement  was  on  the  note  at 
the  time  it  was  signed.  And  that  being  so,  it  became  a  part  of  it, 
and  turned  it  into  a  mere  agreement.  {Cliitty  on  Bills  [8th  ed.]  pp. 
160-61 ;  Leeds  \.  Lancashire,  2  Campb.  205  ;  Hurtlcy  v.  Wilkinson,  4  Id. 
127;  Cookv.  Kelscy,  19  N.  Y.  415.)  As  this  condition  qualified  the 
note,  the  action  could  not  be  sustained  without  showing  that  it  had 
been  fulfilled.  We  are  inclined  to  think  the  legal  effect  of  the 
indorsement  is,  that  the  owner  of  the  old  fanning  mill  was  to  sell  it; 
and  that  parol  evidence  would  be  incompetent  to  show  that  it  was 
agreed  that  plaintiff  should  sell  it.  But  for  the  reason  above  stated, 
the  judgment  must  be  reversed,  and  the  cause  remanded  for  a  new 

trial. 

By  the  aw;-/.— Ordered  accordingly. 


II.  3-]  MUST    BE    U^XONDITIONAL.  1 77 

§  20  WHITE  V.  GUSHING.  [§  i] 

8S  Maine,  339.  —  1896. 

Assumpsit  on  an  order.  The  trial  court  ruled  that  the  order  was 
negotiable  and  the  action  could  be  maintanied  in  the  name  of  White 
by  a  simple  indorsement  by  Lawler.     Defendant  excepted. 

Foster,  J.  — The  plaintiff  sues  as  indorsee  of  an  order  signed  by 
the  defendant  of  the  following  tenor: 

$120.  Dover,  Oct.  27,  1893. 

Piscataquis  Savings  Bank. 

Pay  James  Lawler,  or  order,  one  hundred  and  twenty  dollars,  and  charge  to 
my  account  on  book  No.  — .  J.  N.  Gushing. 

Witness 

The  bank  book  of  the  depositor  must  accompany  this  order. 

The  order  was  indorsed  in  blank  on  the  back  by  James  Lawler  and 
Samuel  Lewis,  and  the  plaintiff  claimed  to  recover  against  the  defend- 
ant as  upon  a  negotiable  instrument.  The  real  question  presented 
is  whether  the  instrument  declared  on  is  negotiable,  so  that  an  action 
may  be  maintained  upon  it  in  the  name  of  the  indorsee. 

To  constitute  a  negotiable  draft  or  order,  it  must  be  a  written 
order  from  one  party  to  another  for  the  payment  of  a  certain  sum 
of  money,  and  that  absolutely,  and  without  any  contingency  that 
would  embarrass  its  circulation,  to  a  third  party  or  his  order  or  bearer. 

It  has  often  been  held  that  a  bill  or  note  is  not  negotiable  if  made 
payable  out  of  a  particular  fund.  But  there  is  a  distinction  between 
such  instruments  made  payable  out  of  a  particular  fund,  and  those 
that  are  simply  chargeable  to  a  particular  account.  In  the  latter 
case,  the  payment  is  not  made  to  depend  upon  the  adequacy  of  that 
fund,  the  only  purpose  being  to  inform  the  drawee  as  to  his  means 
of  reimbursement,  and  the  negotiability  of  the  instrument  is  not 
affected  by  it. 

The  objection  that  is  raised  to  the  negotiability  of  this  instrument 
is,  not  that  it  is  made  payable  out  of  a  particular  fund,  but  that  it  is 
subject  to  such  a  contingency  as  necessarily  embarrasses  its  circula- 
tion and  imposes  a  restraint  upon  its  negotiability,  by  means  of  these 
words  contained  upon  the  face  of  the  order:  "  The  bank  book  of 
the  depositor  must  accompany  this  order."  Although  these  words 
are  upon  the  face  of  the  order  below  the  signature  of  the  drawer, 
they  were  there  at  the  time  of  its  inception,  became  a  substantive 
part  of  it  and  qualified  its  terms  as  if  they  had  been  inserted  in  the 
body  of  the  instrument.  {Little field  \ .  Coombs,  71  Maine,  no;  Ciishing 
V.  Field,  70  Maine,  50,  54;  Johnson  v.  Heagan,  23  Maine,  329; 
Barnard  V.  Gushing,  4  Metcalf,  230;  Heywoodx.  Perrin,  10  Pick.  228; 

NEGOT.    INSTRUMENTS — 12 


178  FORM    REQUIRED.  [ART.  II. 

Benedict  v.  Cowden,  49  N.  Y.  396;  Costelo  v.  Crowell,  127  Mass.  293, 
and  cases  there  cited.) 

Was  the  order  negotiable?  The  answer  to  that  depends  upon  the 
effect  of  the  words  "  The  bank  book  of  the  depositor  must  accom- 
pan}'  this  order,"  If  not  negotiable,  the  plaintiff  as  indorsee  cannot 
maintain  an  action  upon  it.  {^Noyes  v.  Gilinaii,  65  Maine,  5S9.)  If 
their  effect  is  such  as  constitutes  a  contingency  in  relation  to  the 
payment  of  the  order,  dependent  upon  the  production  of  the  drawer's 
bank  book  by  the  holder  or  indorsee  of  the  order,  then  they  must 
be  regarded  as  such  an  embarrassment  to  the  negotiation  of  the 
order,  and  such  a  restriction  upon  its  circulation  for  commercial 
purposes  as  to  render  it  non-negotiable. 

Without  these  words  the  order  is  payable  absolutely,  and  there  is 
no  apparent  uncertainty  affecting  its  negotiability.  With  them,  the 
order  is  payable  only  upon  contingency,  or  condition,  and  that  is 
upon  the  production  of  the  drawer's  bank  book.  This  is  rendered 
imperative  from  the  language  employed,  and  the  bank  upon  which 
the  order  is  drawn,  would  have  the  right  to  insist  upon  such  produc- 
tion of  the  book  in  compliance  with  the  terms  of  the  order;  and  the 
case  shows  that  it  has  refused  payment  upon  presentation  of  the 
order  for  the  reason  that  't  was  not  accompanied  by  the  bank  book. 
It  cannot,  therefore,  be  regarded  as  payable  absolutely  and  without 
any  contingency  that  would  embarrass  its  circulation.  The  drawer 
has  it  in  his  power  to  defeat  its  payment  by  withholding  the  bank 
book.  Certainly  the  bank  book  of  the  depositor  is  within  his  own 
control  rather  than  that  of  the  indorsee  of  this  order. 

It  was  the  necessity  of  certainty  and  precision  in  mercantile  affairs 
and  the  inconveniences  which  would  result  if  commercial  paper  was 
incumbered  with  conditions  and  contingencies,  that  led  to  the  estab- 
lishment of  an  inflexible  rule  that  to  be  negotiable  they  must  be 
payable  absolutely  and  without  any  conditions  or  contingencies  to 
embarrass  their  circulation.  {^American  Ex.  Bank  v.  Blanchard,  7 
Allen,  333.)  In  that  case  the  words,  "  subject  to  the  policy,"  being 
included  in  a  promissory  note,  were  held  to  render  the  promise  con- 
ditional and  not  absolute,  and  so  the  note  was  held  not  to  be  nego- 
tiable. (^Noyes  v.  Gilman,  65  Maine,  589,  591;  Hubbard  \.  Mosely,  11 
Gray,  170.) 

A  case  in  every  essential  like  the  one  we  are  considering  was 
before  the  Supreme  Court  of  Pennsylvania  in  1891.  ^  fac  simile  of 
the  order  is  given  in  the  opinion.  No  two  cases  could  be  nearer 
alike.  There,  as  here,  the  order  was  drawn  on  a  savings  bank.  The 
suit  was  by  the  indorsee  against  the  drawer  as  in  this  case.  There, 
as  here,  the  order  contained  a  statement  upon  its  face,  but  below  the 


II.  3.]  MUST   BE    UNCONDITIONAL.  1/9 

signature  of  the  drawer,  that  the  "  Deposit  book  must  be  at  bank 
before  money  can  be  paid."  In  discussing  the  question  of  its  nego- 
tiability cases  are  cited  from  the  courts  of  Maine,  Vermont,  Massa- 
chusetts and  New  York,  as  well  as  from  Pennsylvania.  In  the 
course  of  the  opinion  the  court  says: 

"  It  sufficiently  appears  from  the  memoranda  on  its  face  that  it 
was  drawn  on  a  specially  deposited  fund  held  by  the  bank  subject  to 
certain  rules  and  regulations,  in  force  between  it  and  the  depositor, 
requiring  certain  things  to  be  done  before  payment  could  be  required, 
viz.:  previous  notice  of  depositor's  intention  to  draw  upon  the  fund, 
return  of  the  notice  ticket  with  the  order  to  pay,  and  the  presenta- 
tion of  the  deposit  book  at  the  bank,  so  that  payment  might  be 
entered  therein.  *  *  *  jj-  j^^  j^  substance,  merely  an  order  on 
the  dollar  savings  bank  to  pay  J.  W.  Quinn,  or  order,  nine  hundred 
dollars  in  nine  weeks  from  date,  or  February  i,  1888,  provided  he  or 
his  transferee  present  to  the  bank,  with  the  order,  the  notice  ticket, 
and  also  produce  at  and  before  the  time  of  payment  the  drawer's 
deposit  book.  As  already  remarked,  these  are  undoubtedly  pre- 
requisites which  restrain  or  qualify  the  generality  of  the  order  to 
pay  as  contained  in  the  body  of  the  instrument.  They  are  also  pre- 
requisites with  which  it  may  be  difficult,  if  not  sometimes  impossible, 
for  the  payee,  transferee,  or  holder  of  such  an  order  to  comply." 
{Iron  City  Nat.  Bank  v.  McCord,  139  Pa.  St.  52,  23  Am.  State  Rep. 
166.) 

The  order  in  question  was  drawn  upon  a  savings  bank,  and  it  is 
common  knowledge  that  all  such  banks  in  this  State  have  a  by-law 
which  all  depositors  are  required  to  subscribe  to,  that  "  no  money 
shall  be  paid  to  any  person  without  the  production  of  the  original 
book  that  such  payment  may  be  entered  therein." 

This  court  in  the  case  of  Sullivan  v.  Lctviston  Inst,  for  Savings  (56 
Maine,  507),  has  considered  the  purpose  and  necessity  of  these  salu- 
tary regulations.  We  should  be  slow  to  countenance  any  departure 
from  this  rule  needed  for  the  protection  of  depositors  in  our  savings 
banks  now  numbering  more  than  160,000,  and  where  deposits  aggre- 
gate nearly  $60,000,000. 

Inasmuch  as  this  order  is  not  negotiable  and  no  suit  can  be  main- 
tained upon  it  by  the  plaintiff  as  indorsee,  it  becomes  unnecessary  to 

consider  the  other  exceptions. 

Exceptions  sustained.' 


'  See  also  the  cases  and  authorities,  post,  pp.  22S  et  seq. —  Ed. 


l8o  FORM    REQUIRED.  [ART.  II. 

{d)  An  order  or  promise  to  pay  out  of  a  particular  fund  is  conditional. 

§  22  WORDEN  v.  DODGE.  [§  3J 

4  Denio  (N.  Y.)  159.  —  1847. 

Assumpsit.  On  the  trial  the  plaintitt  gave  in  evidence  an  agree- 
ment, signed  by  the  defendants,  bearing  date  October  12,  1839,  by 
which,  for  value  received,  they  jointly  and  severally  promised  to  pay 
to  the  plaintiff,  by  his  name  or  order,  $250,  with  interest,  payable 
one-half  in  two  years  and  the  other  half  in  three  years  from  the  day 
of  said  agreement,  "  out  of  the  net  proceeds,  after  paying  the  cost 
and  expenses  of  ore  to  be  raised  and  sold  from  the  bed  on  the 
lot  this  day  conveyed  by  Edward  Madden  to  Edwin  Dodge,  which 
bed  is  to  be  opened  and  the  ore  disposed  of  as  soon  as  conveniently 
may  be." 

On  reading  the  agreement  the  plaintiff  rested,  and  the  defendants 
moved  for  a  nonsuit,  as  the  plaintiff  had  not  shown  that  the  defend- 
ants had  received  enough  from  the  ore  to  pay  the  note,  nor  had  they 
shown  any  default  or  negligence  on  their  part.  The  judge  held  that 
the  plaintiff  could  not  recover  without  proving  that  the  defendants 
had  received  funds  from  the  ore  to  enable  them  to  pay,  or  had  neg- 
lected to  work  the  ore  bed,  and  directed  a  nonsuit. 

The  plaintiff  excepted. 

By  the  Court,  Beardsley,  J.  —  The  nonsuit  was  proper.  A  prom- 
issory note  must  be  payable  absolutely,  and  not  upon  any  contin- 
gency as  to  time  or  event.  (3  Kent,  5th  ed.  p.  74;  Smith  on  Merc. 
Law,  113,  116;  Story  on  Prom.  Notes,  §§  i,  22  to  26;  Id.  on  Bills  of 
Exch.  §§  46,  47;   Chit,  on  Bills,  loth  Amer.  ed.,  p.  132  to  139.) 

This  was  not  such  an  engagement,  for  although  the  promise  was 
to  make  payments  at  certain  specified  times,  the  payments  were  to 
be  made  "  out  of  the  net  proceeds  "  "of  ore  to  be  raised  and  sold  " 
from  a  certain  ore  bed.  Here  was  a  contingency;  the  fund  might 
turn  out  to  be  inadequate,  in  which  case  there  would  be  no  obliga- 
tion to  pay  at  any  time.  It  is  not  a  promise  to  pay  "  absolutely 
and  at  all  events,"  as  a  promissory  note  always  is. 

New  trial  denied.' 


'  "  Please  pay  A.  B.,  or  order,  $500,  for  value  received,  .  .  .  out  of  the 
proceeds  of  the  claim  against  the  Peabody  Estate,  now  in  your  hands  to  collect, 
when  the  same  shall  have  been  collected  by  you,"  is  not  a  negotiable  instru- 
ment, as  the  money  is  payable  out  of  a  particular  fund.  Jiicliardson  v.  Carpen- 
ter, 46  N.  Y.  660. 

"  You  will  please  pay  to  A.  B.  the  amount  of  a  note  for  $2,000,  dated  Decem- 
ber 31st,  1868,  and  deduct  the  same  from  my  share  of  the  profits  of  our  partner- 
ship business  in  malting,"  is  not  a  bill  of  exchange,  for  it  is  payable  out  of  an 
uncertain  fund,  from  profits.     Munger  v.  Shannon,  61  N.  Y.  251.  —  Ed. 


II.  3.]  MUST   BE    UNCONDITIONAL.  l8l 

§  22  COTA  V.  BUCK.  [§  3] 

7  Metcalf  (Mass.),  5SS.  —  1844. 

Indebitatus  assumpsit  on  the  common  money  counts.  Plea,  the 
general  issue.     Trial  in  the  court  of  common  pleas. 

The  plaintiff,  to  maintain  the  issue  on  his  part,  offered  in  evidence 
the  following  instrument: 

New  Ashford,  March  I3lh,  1S40. 
For  value  received,  I  promise  10  pay  John  Pero,  or  bearer,  five  hundred  and 
seventy  dollars,  it  being  for  property  I  purchased  of  him  in  value  at  this  date, 
as  being  payable  as  soon  as  can  be  realized  of  the  above  amount  for  the  said 
propertv  I  have  this  day  purchased  of  said  Pero,  which  is  to  be  paid  in  the 
course  of  the  season  now  coming.  Bushrod  Buck. 

The  defendant  objected,  that  this  instrument  was  not  a  negotiable 
note,  and  therefore  could  not  be  given  in  evidence  by  the  plaintiff 
in  this  action  brought  in  his  own  name.  The  court  decided  that 
said  instrument  was  a  negotiable  note  transferable  by  delivery,  and 
the  same  was  given  in  evidence  to  the  jury,  who  returned  a  verdict 
thereon  for  the  plaintiff.  The  defendant  alleged  exceptions  to  said 
decision. 

Shaw,  C,  J.  —  The  true  test  of  the  negotiability  of  a  note  seems 
to  be,  w^hether  the  undertaking  of  the  promisor  is  to  pay  the  amount 
at  all  events,  at  some  time  which  must  certainly  come,  and  not  out 
of  a  particular  fund,  or  upon  a  contingent  event.  If  it  were  payable 
on  a  contingency,  or  out  of  a  particular  fund,  it  would  not  be  nego- 
tiable. This  note,  we  think,  was  payable  by  the  promisor  at  all 
events,  and  within  a  certain  limited  time.  The  note  is  obscurely 
written  and  ungrammatical.  But  we  think  the  meaning  was  this: 
that  the  signer,  for  value  received  in  the  purchase  of  property, 
promised  to  pay  Pero  or  bearer  the  sum  named,  as  soon  as  the  ter- 
mination of  the  coming  season,  and  sooner,  if  the  amount  could  be 
sooner  realized  out  of  the  fund.  Such  reference  to  the  sale  of  the 
property  was  not  to  fix  the  fund  from  which  it  was  to  be  paid,  but 
the  time  of  payment.  The  undertaking  to  pay  was  absolute,  and 
did  not  depend  on  the  fund.  So  as  to  the  time,  whatever  time  may 
be  understood  as  the  "  coming  season,"  whether  harvest  time  or  the 
end  of  the  year,  it  must  come  by  the  mere  lapse  of  time,  and  that 
must  be  the  ultimate  limit  of  the  time  of  payment. 

Exceptions  overruled. 


l82  FORM    REQUIRED.  [ART.  II. 

§  22  MILLER  V.  POAGE.  [§  3] 

56  Iowa,  96.  —  1881. 

Action  on  the  following  instrument  in  writing: 

$100  Audubon  Tp.,  Audubon  Co.,  Iowa,  April  26,  1878. 

One  year  after  date  I  promise  to  pay  to  the  treasurer  of  the  National  Iron 
Fence  Co.,  of  Cedar  Rapids,  Iowa,  or  order,  one  hundred  dollars,  at  Cedar 
Rapids,  Iowa,  value  received,  with  interest  at  ten  per  cent,  from  date.  Reason- 
able attorney  fee  if  suit  be  instituted  on  this  note.  If  this  agent  does  not  sell 
enough  in  one  year,  one  more  is  granted.  [Signed.] 

There  was  judgment  for  the  defendant  and  the  plaintiff  appeals. 

Seevers,  J.  — The  only  question  to  be  determined  is  whether  the 
instrument  sued  is  negotiable.  The  appellee  insists  it  is  not,  because 
of  the  italicized  words.  The  appellant  insists  the  instrument  is  not 
payable  out  of  a  certain  fund,  and  is  payable  at  the  expiration  of 
two  years  from  date,  if  not  sooner,  and  is,  therefore,  negotiable. 

We  think  the  true  construction  is  that  the  maker  was  the  agent 
of  the  payee  for  the  sale  of  something,  and  if  he  realized  suffi- 
cient funds  from  such  sales  the  amount  specified  was  to  be  paid 
within  one  year.  Payment  during  such  time  was  to  be  made  only  on 
condition  that  the  necessary  funds  were  realized.  This  clearly 
implies  the  instrument  was  to  be  paid  out  of  a  particular  fund,  and 
for  this  reason,  and  because  payable  only  on  the  happening  of  a  con- 
dition, it  was  not  negotiable  during  the  period  aforesaid.  It  is  true 
it  is  payable  absolutely  at  the  expiration  of  two  years.  But  we 
think  it  must  have  been  negotiable  when  executed,  and  continuously 
from  that  time,  or  not  at  all. 

No  adjudicated  case  to  which  our  attention  has  been  called  is  pre- 
cisely like  this.  The  nearest  approach  to  it  is  Cola  v.  Buck  (7  Mer. 
588).  It  is  difficult  to  draw  a  sharp  distinction  between  the  two 
cases.  We  shall  not,  therefore,  make  the  attempt,  but  determine 
the  case  at  bar  upon  principle,  as  we  deem  right. 

Affirmed. 

Day,  J.,  d/sst'iili/ig. — I  cannot  concur  in  the  foregoing  opinion. 
It  cites  no  authority  and  is  in  conflict  with  Cola  v.  Bitck  (7  Met. 
588),  to  which  it  refers.  In  my  opinion  the  instrument  in  question 
possesses  all  the  elements  of  negotiability.  The  italicized  portion 
does  not  render  the  note  payable  out  of  a  particular  fund,  but  simply 
provides  a  condition  upon  which  the  payment  shall  be  extended  one 
year.     The  note  may  be  payable  in  one  year.     It  is  payable  abso- 


II.  3-]  MUST   BE    UNCONDITIONAL.  1 83 

lutely  in    two   years.       In    my    opinion    the    plaintiff   should    have 
recovered. 

Adams  Ch.  J.,  concurs  in  this  dissent.' 


(c)  An  indication  of  a  particular  fund  does  not  render  prot?iise 

conditional. 

§  22  SCHAIITTLER  v.  SIMON.  [§  3] 

loi  New  York,  554.  —  1SS6. 

RuGER,  Ch.  J.  — The  plaintiff  claimed  to  recover  as  the  holder  of 
a  draft  drawn  upon  and  accepted  by  the  defendant,  reading  as 
follows: 

New  York,  February,  26  1877. 

Mr.  Adam  Simon,  executor,  will  please  pay  to  Johannes  Schmittler  or  his 
Older,  on  the  first  day  of  July,  which  will  be  in  the  year  1879,  the  sum  of  $900, 
with  seven  per  cent,  interest,  to  be  paid  besides  this  amount  yearly,  July  month, 
and  charge  the  amount  against  me  and  of  my  mother's  estate. 

William  J.  Scharen. 

[Written  upon  the  face]:  Accept,  Adam  Simon,  executor;  [and  indorsed]:  Pay 
to  the  order  of  Mary  Schmittler,  the  amount  of  note.     Johannes  Schmittler. 

Upon  the  trial,  after  proving  the  execution  of  the  draft,  its  accept- 
ance and  transfer,  and  offering  to  prove  the  payment  of  a  considera- 
tion by  the  plaintiff  to  the  payee,  which  was  objected  to  by 
defendant,  and  excluded  by  the  court,  the  plaintiff  rested.  The 
defendant  thereupon  moved  to  nonsuit  upon  the  ground  that  the 
obligation  was  not  binding  upon  the  defendant  personally,  but  he 
was  liable  thereon,  if  at  all,  in  his  representative  character  alone, 
and  that  it  was  payable  out  of  a  specific  fund,  and  a  recovery 
thereon  could  not  be  had  without  proving  the  existence  and  extent 
of  such  fund.  The  court  thereupon  nonsuited  the  plaintiff,  to  which 
decision  she  excepted.  The  General  Term  having  affirmed  the 
determination  of  the  trial  court,  the  plaintiff  took  this  appeal. 

AVe  think  the   court  below  erred  as  to  both  of  the   grounds  upon 

'  JossELYN  V.  Lacier,  10  Mod.  R.  294,  316,  — 1715.  Evans  drew  a  bill  upon 
Josselyn,  requiring  him  to  pay  Lacier  seven  pounds  every  month  out  of  the 
growing  subsistence  of  Evans,  and  place  it  to  his  account.  Josselyn  accepted 
it,  and  afterward  refused  to  pay.  Parker,  C.  J. —  "  We  are  all  of  opinion  that 
it  is  not  a  bill  within  the  custom  of  merchants;  it  concerns  neither  trade  nor 
credit;  it  is  to  be  paid  out  of  the  growing  subsistence  of  the  drawer;  if  the 
party  die,  or  his  subsistence  be  taken  away,  it  is  not  to  be  paid."  Accord:  feiniev 
V.  Herle,  2  Ld.  Raym.  1361;  McGee  v.  Larramore,  50  Mo.  425;  fackman  v. 
Boivker,  4  Met.  (Mass.)  235.  —  Ed. 


l84  FORM    REQUIRED.  [ART.  11. 

which  their  judgment  proceeded.  That  the  defendant  was  Hable 
upon  the  draft,  if  Hable  at  all,  in  his  individual  capacity  alone,  seems 
under  the  authorities  to  admit  of  no  doubt.' 

§  74  [44]  Neither  executors  nor  administrators  have  power  to  bind 
the  estate  represented  by  them  through  an  executory  contract,  hav- 
ing for  its  object  the  creation  of  a  new  liability,  not  founded  upon  the 
contract  or  obligation  of  the  testator  or  intestate.  They  take  the 
personal  property  as  owners  and  have  no  principal  behind  them  for 
whom  they  can  contract.  The  title  vests  in  them  for  the  purposes 
of  administration,  and  they  must  account  as  owners  to  the  persons 
ultimately  entitled  to  distribution.  In  actions  upon  contracts  made 
by  them,  however  they  may  describe  themselves  therein,  they  are 
personally  liable,  and  in  actions  thereon  the  judgment  must  be  de 
bonis propriis.  Not  so,  however,  upon  contracts  made  by  their  testator 
or  intestate;  in  such  cases  the  judgment  is  always  de  bonis  testatoris. 
{Gillet  V.  Hutchinson  s  Adni.,  24  Wend.  184;  Ferrin  v.  My?'ick,  41  N. 
Y.  315;  Austin  V.  Monroe,   47  id.  360,  366.) 

The  action  here  is  exclusively  upon  the  undertaking  of  the  defend- 
ant, importing  a  promise  to  pay  the  sum  of  $900  on  the  ist  day  of 
July,  1879,  to  the  payee  of  the  draft  or  his  order  for  a  consideration 
received  by  the  promisor.  No  facts  are  alleged  or  proved,  showing 
any  liability  on  the  part  of  the  defendant's  testator  to  the  drawee  of 
the  draft,  or  any  legal  demand  existing  in  his  favor,  against  the 
estate  represented  by  the  defendant. 

It  follows  that  the  obligation  must  be  held  to  be  the  individual 
contract  of  the  defendant,  and  enforceable  as  such  by  a  judgment 
against  him,  and  execution  to  be  levied  dc  bonis  propriis,  or  it  is 
nudum  pactum  creating  no  liability  whatever. 

The  cases  are  very  numerous  to  the  effect  that  the  addition  of  an 
official  character,  to  the  signatures  of  executors  and  administrators, 
in  executing  written  contracts  and  obligations  has  no  significance, 
and  operates  merely  to  identify  the  person  and  not  to  limit  or  qualify 
the  liability.  Thus  it  was  held  in  Pifmeyv.  Adm" rs  of  Johnson  (8 
Wend.  500),  that  a  bond  given  by  administrators  in  their  representa- 
tive capacity  to  a  creditor  for  a  debt  of  their  intestate,  was  the  indi- 
vidual obligation  of  the  administrators  and  enforceable  against  them 
de  bonis  propriis  only;  that  the  description  of  the  obligors  in  the  bond 
as  administrators,  and  their  promise  in  that  character  was  surplus- 
age, and  they  were  chargeable  upon  such  a  bond  only  in  their  per- 
sonal capacity.      (See,  also,  Gould  v .  Ray,  13  Wend.  633.)     Parsons 

'  On  a  subsequent  appeal,  after  a  new  trial,  the  court  thought  this  result 
might  be  qualified  by  parol  evidence,  s.  c.  114  N.  Y.  I77-  See  Neg.  Inst.  L. 
§  74  [44].  —  Ed. 


II.  3-]  MUST   BE   UNCONDITIONAL.  185 

on  Bills  and  Notes  (vol.  i,  161),  lays  down  the  rule  that  "  an  admin- 
istrator or  executor  can  only  bind  himself  by  his  contracts;  he 
cannot  bind  the  assets  of  the  deceased.  Therefore,  if  he  make, 
indorse,  or  accept  negotiable  paper,  he  will  be  held  personally  liable, 
even  if  he  adds  to  his  own  name  the  name  of  his  office;  signing  a 
note  for  example,  'A.  as  executor  of  B.,'  for  this  will  be  deemed  only 
a  part  of  his  description  or  will  be  rejected  as  surplusage."  (To 
similar  effect  are  Pumpclly  v.  Phelps,  40  N.  Y.  59;  Taft  v.  Brewster, 
9  Johns.  334;  Forster  v.  Fuller,  6  Mass.  58;  Hills  v.  Banister,  8  Cow. 
31;  Thatcher  v.  Dismore,  5  Mass.  299;  Cornthwaite  v.  First  Nat. 
Bafik,  57  Ind.  268.) 

§  22  [3]  Being  of  the  opinion,  therefore,  that  the  defendant  is  liable 
upon  the  draft  in  question  in  his  individual  capacity  alone,  the  ques- 
tion still  remains  as  to  the  extent  of  such  liability.  He  was 
undoubtedly  competent  to  enter  into  a  personal  contract  in  reference 
to  the  funds  in  his  possession,  and  in  such  case  would  be  bound  to 
perform  according  to  the  tenor  and  legal  effect  of  the  obligation 
assumed  by  him,  and  entitled  to  be  allowed  the  amount  paid  upon 
an  accounting,  as  executor.  Such  instruments  are  subject  to  the 
rules  of  construction  applicable  to  other  contracts,  and  must  be 
interpreted  upon  consideration  of  the  language  used  by  the  parties, 
with  a  view  of  arriving  at  their  intention  in  executing  them.  The 
court  below  held  that  the  draft  in  question  was  payable  only  from  a 
particular  fund,  and  was,  therefore,  non-negotiable,  and  enforceable 
only  to  the  extent  of  the  fund  referred  to. 

Considering  the  question  as  we  are  compelled  to  do  from  the 
language  of  the  instrument  alone,  we  are  unable  to  agree  to  the 
intrepretation  thus  put  upon  it.  It  is  not  claimed  that  there  is  any 
distinction  between  the  instrument  in  question  and  an  ordinary  bill 
of  exchange  except  that  made  by  the  clause  referring  to  the  mother's 
estate.  Unless  that  clause  deprives  the  paper  of  its  commercial 
character,  the  rights  and  liabilities  of  the  parties  thereto  must  be 
governed  by  the  rules  pertaining  to  negotiable  securities,  which 
would  render  the  defendant  liable  for  the  amount  named  in  the  draft, 
upon  the  theory  that  his  acceptance  was  an  admission  by  him  of 
assets  applicable  to  its  payment. 

The  distinction  between  a  fund  from  which  a  draft  or  order  is 
directed  to  be  paid,  and  one  referred  to  as  the  means  of  reimburse- 
ment to  its  drawee,  is  a  material  one  and  cannot  be  disregarded  in 
the  construction  of  such  instruments.  Thus  it  is  said:  "  When  a 
reference  is  made  to  a  special  fund  merely  as  a  direction  to  the 
drawee  how  to  reimburse  himself,  and  the  payment  is  not  made  to 
depend  upon  the  adequacy  of  the  fund,  it  will  not  vitiate  the  bill." 


l86  FORM    REQUIRED.  [ART.  II. 

{^Edw.  on  Bills  and  Notes,  §  158;  see  also  Parsons  on  Merc.  Law, 
87;  Chitty  on  Bills,  158.)  Dwight,  Com.,  in  Mu/iger  v.  Shannon  (61 
N.  Y.  255),  says:  "  A  bill  is  an  order  drawn  by  one  person  on 
another  to  pay  a  third  a  certain  sum  of  money  absolutely  and  at  all 
events.  Under  this  definition  the  order  cannot  be  paid  out  of  a 
particular  fund,  but  must  be  drawn  on  the  general  credit  of  the 
drawer,  though  it  is  no  objection,  when  so  drawn,  that  a  particular 
fund  is  specified  from  which  the  drawee  may  reimburse  himself." 
Judge  Rapallo,  in  Brill  v.  Tiittlc  (81  N.  Y.  457),  says:  "  If  a  draft 
be  drawn  generally  upon  the  drawee,  to  be  paid  by  him  in  the  first 
instance,  on  the  credit  of  the  drawer  and  without  regard  to  the 
source  from  which  the  money  used  for  its  payment  is  obtained, 
the  designation  by  the  drawer  of  a  particular  fund,  out  of  which  the 
drawee  is  to  subsequently  reimburse  himself  for  such  payment,  or  a 
particular  account  to  which  it  is  to  be  charged,  will  not  convert  the 
draft  into  an  assignment  of  the  fund,  and  the  payee  of  the  draft  can 
have  no  action  thereon  against  the  drawee  unless  he  duly  accepts." 
In  that  case  the  drawee  refused  to  accept  and  the  action  was  sought 
to  be  maintained  upon  the  theory  of  an  equitable  assignment.  It 
was  held  under  the  peculiar  circumstances  of  the  case,  and  the  form 
of  the  instrument,  that  it  did  transfer  the  fund. 

It  is  thus  seen  that  the  mere  mention  of  a  fund  in  a  draft,  does 
not  necessarily  deprive  it  of  the  character  of  commercial  paper,  but 
it  must  further  appear,  in  order  to  have  that  effect,  that  it  contains 
either  an  express  or  implied  direction  to  pay  it  therefrom,  and  not 
otherwise. 

The  question,  therefore,  to  be  determined  here  is,  whether  the  fund 
in  question  is  referred  to  as  the  measure  of  liability  or  the  means  of 
reimbursement.  While  the  point  is  not  free  from  doubt,  we  think  a 
reasonable  construction  of  the  draft  favors  the  conclusion  that  it  is 
mentioned  only  as  the  source  of  reimbursement.  No  express 
language  in  it  can  be  pointed  out  as  requiring  its  payment  from  the 
fund  mentioned,  and  none  from  which  that  requirement  can  be 
implied,  except  such  as  exists  in  all  drafts  where  a  fund  is  referred 
to.  Its  language  is  to  "  charge  the  amount  against  me  and  of  my 
mother's  estate"  and  contains  no  provision  for  delay  until  the 
amount  is  realized  from  the  estate,  or  for  payment//-^  tanto  in  case 
the  estate  should  prove  insufficient  to  pay  the  whole  amount.  There 
is  no  language  importing  a  transfer  of  the  fund  to  the  payee,  and 
nothing  from  which  such  an  intention  can  be  inferred.  The  draft 
contains  an  absolute  direction  to  pay  a  fixed  sum,  at  a  specified 
date,  with  interest.  It  imports  a  present  indebtedness  of  a  sum 
named,  from  the  drawee  to  the  payee,  and  an  absolute  direction  to 


II.  3-]  MUST   BE    UNCONDITIONAL.  187 

pay  that  sum  at  a  fixed  date,  subject  to  no  contingency  either  as  to 
time  or  amount.  In  express  language  he  directs  the  amount  when 
paid  to  be  charged  against  him  individually,  and  adds  the  words, 
plainly  implying,  as  we  think,  that  the  fund  for  the  acceptor's  reim- 
bursement would  be  found  in  an  amount  eventually,  or  immediately 
payable   to   the  drawer  from  his   mother's  estate. 

We  think,  also,  that  the  insertion  of  words  expressly  making  the 
paper  negotiable,  was  quite  significant  and  indicated  an  intention 
on  the  part  all  of  parties,  that  it  should  be  transferable,  and  partake 
of  the  character  of  commercial  paper.  Any  contingency  inferable 
from  the  language  of  the  draft,  making  the  amount  payable  thereon 
indefinite  and  uncertain,  would  tend  largely  to  depreciate  its  value 
for  such  purpose,  and  defeat  the  intention  with  which  it  was  appar- 
ently made. 

If  the  language  of  the  paper  could  be  considered  at  all  ambiguous, 
it  was  the  duty  of  the  defendant  to  limit  his  liability  by  apt  words 
of  acceptance  when  it  was  presented  to  him,  but  as  it  is,  he  has 
unqualifiedly  promised  to  pay  a  fixed  and  definite  sum  at  a  specified 
time,  and  we  think,  should  be  held  to  the  contract  which  other  parties 
were  authorized  by  his  acceptance  to  infer  he  intended  to  make. 

The  case  of  Tassey  v.  Church  (4  Watts  &:  Sergeant,  346),  seems 
quite  in  point.     The  instrument  there  read: 

$555.48.  Alleghany,  isx.  July,  1840. 

Please  pay  Church,  McVay  &  Gordon  $555.48  and  charge  the  estate  of 
Thomas  C.  Patterson.  Adam  Flemmixg,   Trustee. 

To  John  Tassey,  Administrator. 

[Indorsed]:  Accepted,  John  Tassey,  Administrator. 

Fleming  was  the  trustee  of  Mrs.  Patterson,  who  was  the  heir  at  law 
of  Thomas  C.  Patterson;  Tassey  was  the  administrator  of  Patter- 
son's estate.  It  was  held  that  the  promise  of  the  acceptor  was 
unconditional  and  bound  him  absolutely.  In  Childs  v.  Moiiins  (6 
Eng.  C.  L.  228),  the  defendants,  as  executors  of  the  estate  of 
Thomas  Taylor,  promised  to  pay  ;!^2oo  on  demand  with  interest, 
signing  as  executors.  It  was  held  that  they  became  personally  liable. 
and  that  the  plea  of  pleiie  administravit  was  no  defense.  It  was  fur- 
ther held  that  the  promise  to  pay  interest  made  the  debt  that  of  the 
administrators  personally.  In  Kelly  v.  Brooklyn  (4  Hill,  263),  the 
action  was  upon  an  order  drawn  by  the  mayor  upon  the  treasurer  of 
the  defendant  in  the  following  words:  "  Pay  Alexander  Lyon  or 
order  $1,500  for  award  No.  7,  and  charge  to  Bedford  Road  Assess- 
ment." It  was  held  that  it  was  a  bill  of  exchange  and  not  payable 
from  a  particular  fund.  For  further  illustration  of  the  point  under 
discussion  we  would    refer   to  Hollister  v.  Hopkins  (13   Hun,    210); 


1 88  FORM    REQUIRED.  [ART.  II. 

Redman  v.  Adams  (51  Me.  429);  Luff  v.  Pope  (5  Hill,  413).  The 
case  of  Tooker  v.  Arnoux  (76  N.  Y.  397),  is  referred  to  by  the 
respondent  as  sustaining  the  views  of  the  court  below;  but  we  are  of 
the  opinion  that  it  cannot  be  so  regarded.  The  order  there  directed 
the  drawee  to  pay  a  certain  sum  out  "  of  the  money  to  be  realized 
from  the  sale  "  of  certain  houses.  This  order  was  accepted,  and  it 
was  held  that  a  sale  of  the  houses  was  a  condition  precedent  to  any 
liability  on  the  part  of  the  acceptor.  This  was  the  plain  language 
of  the  contract. 

In  all  the  cases  examined  by  us  where  an  order  has  been  held  to 
operate  as  an  equitable  assignment  of  a  fund,  there  were  either 
special  phrases  contained  in  the  instrument,  indicating  an  intent  to 
have  it  so  operate,  or  ambiguous  language  used,  which,  construed  in 
the  light  of  surrounding  circumstances,  justified  the  inference  of  a 
limitation  of  liability.  {Parker  v.  Syracuse,  31  N.  Y.  376;  Alger  \. 
Scott,  54  id.  14;  Midiger  v.  Shannon,  61  id.  251;  Ehrichs  v.  De  Mill, 
75  id.  370;  Brill  \\  Tuttle,  supra.)  Here,  however,  there  is  no  such 
language,  and  this  contract  is  to  pay  a  fixed  amount  at  a  specified 
date,  absolutely  and  unconditionally. 

We  are,  therefore,  of  the  opinion  that  the  instrument  in  question 
is  a  bill  of  exchange  and  rendered  the  parties  executing  it  liable 
absolutely  for  the  amount  stated  therein. 

The  judgment  of  the  courts  below  should  be  reversed  and  a  new 

trial  ordered,  with  costs  to  abide  the  event. 

All  concur. 

Judgment  reversed. 


§  22  REDMAN  v.  ADAMS.  [§  3] 

51  Maine,  429.  —  1863. 

Case  stated  by  the  parties. 

Assumpsit  on  an  order  of  which  the  following  is  a  copy: 

Castine,  y<7;/.  5,  i860. 
For  value   received,  please  pay  to  order  of  G.  F.  and  C.  W.  Tilden  forty  dol- 
lars, and  charge  same   against  whatever  amount  may  be  due  me  for  my  share 
of   fish   caught  on  board  schooner  "  Morning  Star,"   for  the  fishing  season  of 
i860.  Yours,  etc., 

Frank  R.  Bl.a.ke. 
To  Messrs.  Adams  &  Co. 
Accepted  to  pay.  —  Adams  &  Co. 

If  the  plaintiff,  as  indorsee  of  the  order,  cannot  maintain  this 
action,  he  is  to  become  nonsuit;  otherwise  the  action  is  to  stand 
for  trial. 


II.  3-]  MUST   BE    UNCONDITIONAL.  I89 

The  opinion  of  the  court  was  drawn  up  by 

Barrows,  J.  — Is  the  instrument  declared  on  negotiable,  so  that 
an  action  may  be  maintained  upon  it  in  the  name  of  an  indorsee 
against  either  of  the  prior  parties  ?  What  constitutes  a  negotiable 
draft?  It  must  be  a  written  order  from  one  party  to  another  for  the 
payment  of  a  sum  certain  of  money  only,  and  that  absolutely  and 
without  contingency,  to  a  third  party  or  his  order  or  bearer. 

It  has  often  been  held  that  a  bill  or  note  payable  out  of  a  particu- 
lar limited  fund  is  not  negotiable,  but  there  is  a  difference  between 
making  the  money  payable  out  of  a  particular  fund  and  a  mere 
reference  to  the  fund  in  the  draft  to  call  the  attention  of  the  drawee 
to  his  means  of  reimbursement. 

In  this  case,  the  order  requires  the  drawees  to  pay  to  the  order  of 
G.  F.  and  C.  W.  Tilden  the  sum  of  forty  dollars,  absolutely  and 
without  contingency.  A  means  of  reimbursement  is  indicated  to 
the  drawees  in  the  words  appended,  "  and  charge  the  same  against 
whatever  amount  may  be  due  me  for  my  share  of  fish,  etc.,"  but  the 
payment  of  the  order  is  not  made  to  depend  upon  his  having  any 
share  of  fish,  nor  is  the  call  limited  to  the  proceeds  thereof. 

In  Reeside  v.  Knox  (2  Wheaton,  253),  cited  by  defendant's  counsel, 
the  order  was  drawn  on  the  Postmaster  General  of  the  United 
States,  and  in  his  official  capacity.  The  Court  expressly  say,  "  no 
objection  would  lie  to  the  form  of  the  bill  in  the  present  instance, 
wei-e  the  drawee  an  individual.  It  is  matter  of  public  notoriety  that 
government  accepts  for  no  more,  and  is  bound  for  no  more,  what- 
ever be  the  form  of  the  acceptance,  than  it  has  in  its  hands,  and  that 
it  treats  a  bill  drawn  on  it  as  no  more  than  an  assignment  or  order  of 
transfer."  In  that  case,  the  language  of  the  draft  was,  "  pay  to  my 
order  five  thousand  dollars,  for  value  received,  and  charge  the  same 
to  my  account,  for  transporting  the  U.  S.  mail."  No  substantial 
difference  in  form  between  that  order  and  the  one  under  considera- 
tion is  observed.  Such  an  order,  the  Court  in  that  case  say,  would 
be  negotiable,  but  for  the  fact  of  its  being  drawn  on  a  government 
officer. 

According  to  the  agreement  of  the  parties, 

The  case  is  to  stand  for  trial. 


IQO  FORM    REQUIRED.  [ART.  II, 

(</)   Statement  of  transaction  which  gives  rise  to  instrument  does  not  ren- 
der promise  conditional . 

§  22     SIEGEL  V.  CHICAGO  TRUST  &  SAVINGS  BANK.      [§  3] 

131  Illinois,  569.  —  1890. 

Mr.  Chief  Justice  Shope  delivered  the  opinion  of  the  Court. 

This  was  an  action  of  assumpsit,  by  appellee,  against  appellants, 
upon  the  following  instrument: 
$300.  Chicago,  March  5,  1SS7. 

On  July  I,  1887,  we  promise  to  pay  D.  Dalziel,  or  order,  the  sum  of  three 
hundred  dollars,  for  the  privilege  of  one  framed  advertising  sign,  size  —  x  — 
inches,  one  end  of  each  of  one  hundred  and  fifty-nine  street  cars  of  the  North 
Chicago  City  Railway  Co.,  for  a  term  of  three  months,  from  May  15,  1887. 

SiEGEL,  Cooper  and  Co. 

—  which  was  indorsed  by  Dalziel,  the  payee,  to  appellee,  for  value 
on  the  day  of  its  execution. 

The  first  question  presented  is,  is  this  instrument  negotiable?  — 
and  this  question  has  been  answered  affirmatively  by  the  Circuit  and 
Appellate  Courts.  The  Appellate  Court  having  affirmed  the  judg- 
ment in  favor  of  the  plaintiff,  the  case  is  brought  here  by  appeal, 
upon  certificate  of  importance  granted  by  that  court. 

It  appears,  that  before  the  time  when  the  privilege  of  advertising 
was  to  commence  Dalziel  forfeited  any  right  he  may  have  acquired 
to  use  the  cars  in  the  manner  indicated,  and  the  privilege  specified 
never  was  furnished  appellants;  and  it  is  insisted  that  the  instru- 
ment is  a  simple  contract,  only,  and  that  therefore  the  same 
defense,  —  failure  of  consideration,  —  is  available  against  the 
indorsee  of  the  paper  for  value,  and  before  due,  as  might  be  inter- 
posed against  such  paper  in  the  hands  of  the  payee.  It  is  also 
insisted,  that  the  instrument  shows,  on  its  face,  that  payment 
depended  upon  a  condition  precedent  to  be  performed  by  the  payee, 
and  therefore  the  indorsee  took  it  with  notice,  and  by  the  failure  of 
the  payee  to  perform  the  condition,  no  right  of  recovery  exists  in  the 
indorsee.  It  is  not  contended  that  the  indorsee  had  any  other  notice 
than  that  contained  in  the  instrument  itself,  and  it  is  apparent  that 
at  the  time  of  its  indorsement,  which  was  the  day  of  its  execution, 
no  right  to  the  consideration  had  accrued  to  the  makers.  It  is  a 
promise  to  pay  a  certain  sum  of  money  at  a  day  certain,  for  a  con- 
sideration thereafter  to  be  rendered,  and  depends  for  its  validity 
upon  the  implied  promise  of  the  payee  to  furnish  the  consideration 
at  the  time  and  in  the  manner  stipulated,  —  that  is,  it  is  a  promise 
to  pay  a  sum  certain  on  a  particular  day,  in  consideration  of  the 


II.  3-]  MUST   BE    UNCONDITIONAL.  I9I 

promise  of  the  payee  to  do  and  perform  on  his  part.  A  promise  is 
a  valuable  consideration  for  a  promise. 

But  the  question  remains,  whether  the  statement  or  the  recital  of 
the  consideration  on  the  face  of  the  instrument  impairs  its  negotia- 
bility, and,  in  this  instance,  amounts  to  a  condition  precedent.  The 
mere  fact  that  the  consideration  for  which  a  note  is  given  is  recited 
in  it,  although  it  may  appear  thereby  that  it  was  given  for  or  in 
consideration  of  an  executory  contract  or  promise  on  the  part  of  the 
payee,  will  not  destroy  its  negotiability,  unless  it  appears,  through 
the  recital,  that  it  qualifies  the  promise  to  pay,  and  renders  it  con- 
ditional or  uncertain,  either  as  to  the  time  of  payment  or  the  sum  to 
be  paid.  {Daniel  on  Neg.  Inst.  sees.  790-797;  Davis  y.  McCready, 
17  N.  Y.  320;  State  Nat.  Bank  v.  Casson,  39  La.  Ann.  865;  Goodloe 
V.  Taylor^  13  X.  C.  458;  Stevens  v.  Bli/nt,  7  jMass.  240.) 
.  In  State  A^at.  Bank  v.  Casson  {supi\i),  it  is  said  :  "  Plaintiff  received 
the  note  before  maturity,  and  before  the  failure  of  the  consideration. 
Even  if  it  were  known  to  him  that  the  consideration  was  future  and 
contingent,  and  that  there  might  be  offsets  against  it,  this  would 
not  make  him  liable  to  the  equities  between  the  defendant  and  the 
payee.  It  cannot  affect  the  negotiability  of  a  note  that  its  considera- 
tion is  to  be  hereafter  realized,  or  that,  from  contingency,  it  may 
never  be  enjoyed." 

The  most  that  can  be  said  of  a  recital  in  the  instrument  itself,  of 
the  consideration  upon  which  it  rests,  is,  that  the  indorsee,  taking  it 
before  maturity,  is  chargeable  with  notice  of  the  recital.  Such 
recital,  however,  is  not  sufficient,  of  itself,  to  advise  him  that  there 
was,  or  would  necessarily  be,  a  failure  of  consideration,  but  if,  at  the 
time  of  the  indorsement,  the  consideration  has  in  fact  failed,  the 
recital  might  be  sufficient  to  put  him  upon  inquiry,  and,  in  connec- 
tion  with   other  facts,  amount  to  notice.      {Henneberry  v.  Morse,  56 

III.  394.)  The  case  at  bar  does  not,  however,  fall  within  the  rule 
just  stated,  for  the  assignment  was  made  the  same  day  the  note  was 
made,  and  by  the  terms  of  the  recital  it  was  apparent  the  payee  was 
required  to  do  no  act  till  the  15th  of  May  following,  — an  interval  of 
seventy  days. 

There  is  a  distinction,  clearly  recognized  in  the  authorities, 
between  an  instrument  payable  at  a  particular  day,  and  one  payable 
upon  the  happening  of  some  event;  and  the  rule  is,  that  where 
the  parties  insert  a  specific  date  of  payment,  the  instrument 
is  then  payable  at  all  events, — and  this,  although,  in  the  same 
instrument,  an  uncertain  and  different  time  of  payment  may  be 
mentioned,  as,  that  it  shall  be  payable  upon  a  particular  day,  or 
upon  the  completion  of  a  house,  or  the   performance  of  other  con- 


192  FORM    REQUIRED.  [ART.   II. 

tracts,  and  the  like.  [AfcCarty  v.  HmveH,  24  111.  341,  and  authorities 
supra.)  But  the  doctrine  of  this  and  kindred  cases,  where  there  are 
both  a  certain  day  of  payment  and  one  more  or  less  contingent, 
need  not  be  here  invoked,  for  the  time  of  payment  in  the  instrument 
under  consideration  is  not  made  to  depend  upon  the  happening  or 
not  happening  of  any  event,  but  is  specific  and  certain,  and  must 
occur  by  the  efflux  of  time,  alone. 

If,  therefore,  it  be  conceded,  as  it  must,  that  a  condition  inserted 
in  a  promissory  note,  postponing  the  day  of  payment  until  the  hap- 
pening of  some  uncertain  or  contingent  event,  will  destroy  its  nego- 
tiability and  render  the  instrument  a  mere  agreement,  yet  under  the 
authorities,  if  by  the  instrument  the  maker  promises  to  pay  a  sum 
certain  at  a  day  certain  to  a  certain  person  or  his  order,  such  instru- 
ment must  be  regarded  as  negotiable,  although  it  also  contains  a 
recital  of  the  consideration  upon  which  it  is  based,  and  although  it 
further  appear  that  such  consideration,  if  executory,  may  not  have 
been  performed.  Here,  the  money  was  payable,  absolutely,  on  the 
first  day  of  July,  1S87,  — a  time  when  the  contract  for  the  adver- 
tising could  not  have  been  completed.  If  the  instrument  had 
remained  the  property  of  the  payee,  and  upon  its  maturity  and  per- 
formance to  that  time,  suit  had  been  brought,  it  is  clear  that  no  plea 
of  partial  failure  of  consideration  could  have  been  sustained,  for  the 
reason  that  the  entire  term  had  not  then  expired.  No  analysis  of 
the  instrument  itself  is  necessary.  The  most  careful  examination 
of  it  will  fail  to  disclose  a  condition  precedent  to  the  payment  of  the 
money  at  the  time  stipulated.  Nor  is  there  anything  in  the  recital 
of  the  consideration  to  put  the  indorsee  upon  inquiry  at  the  time  the 
indorsement  was  made.  Indeed,  it  is  clear  that  at  that  time  no 
inquiry  would  have  led  to  notice  that  Dalziel  would  fail  to  comply 
with  his  contract  on  the  15th  of  May  thereafter,  when  the  term  was 
to  commence.  All  that  the  recitals  would  give  notice  of  was,  that 
the  note  was  given  in  consideration  of  an  agreement  on  the  part  of 
the  payee  that  the  privilege  of  advertisement  named  should  be 
enjoyed  by  the  makers  for  three  months,  from  May  15,  18S7.  Giving 
to  the  language  employed  its  broadest  possible  meaning,  it  cannot 
be  construed  as  notice  to  the  indorsee  of  the  future  breach  of  the 
contract  by  Dalziel.  The  presumption  of  law  would  be,  that  the 
contract  would  be  carried  out  in  good  faith,  and  the  consideration 
performed  as  stipulated.  The  makers  had  put  their  promissory  note 
in  the  hands  of  Dalziel  upon  an  express  consideration  which  they 
were  thereafter  to  receive,  and  for  the  performance  of  which  they 
had  seen  fit  to  rely  upon  the  undertaking  of  Dalziel,  and  we  are 
aware  of  no  rule  by  which   they  can  hold  this  indorsee  for  value, 


II.  3-]  MUST   BE    UNCONDITIONAL.  I93 

before  due  and  before  the  time  of  performance  was  to  begin,  charge- 
able with  notice  that  the  promise  upon  which  the  makers  relied 
would  not  be  kept  and  performed.  {Wade  on  Notice,  §  94a;  Loomis 
^.  Maury,    15   N.    Y.    312;    Davis  \.  McCready,  sttpra.) 

It  is  also  contended  that  the  court  erred  in  giving  the  eighth 
instruction  in  behalf  of  appellee,  as  to  the  meaning  of  the  words 
"good  faith."'  Without  pausing  to  discuss  the  instruction,  we 
think  it  clear  that  appellants  were  not  prejudiced  thereby,  and  that 
no  inference  unfavorable  or  prejudicial  to  them  could  have  been 
drawn  therefrom  by  the  jury.  While,  therefore,  the  instruction 
may  be  regarded  as  inaccurate,  it  worked  no  injury,  and  the  appel- 
lants cannot  complain.      {Comstock  ct  al.  \ .  Hannah,  76   111.  530.) 

Other  minor  objections  are  urged,  which,  it  is  sufficient  to  say, 
we  have  examined  with  care,  but  find  no  prejudicial  error. 

The  judgment  of  the  Appellate  Court  will  be  affirmed. 

Judgment  affirmed.^ 


§  22  [3]  Wells  v.  Brigham,  6  Gushing  (Mass.)  6.  —  1850.  "  Mr. 
Brigham,  Dear  Sir:  You  will  please  pay  Elisha  Wells  $30,  which 
is  due  me  for  the  two-horse  wagon  bought  last  spring,  and  this  may 
be  your  receipt."  Shaw,  C.  J.  —  "The  fact  that  the  draft  indi- 
cates a  debt  due  to  the  drawer  as  the  consideration,  between  drawer 
and  drawee,  does  not  make  it  the  less  a  cash  order  or  draft.  *  *  * 
The  statement  of  the  origin  of  the  debt,  the  purchase  of  the  wagon, 
did  not  make  it  the  less  payable  absolutely,  and  at  all  events,  and 
not  conditionally  or  out  of  a  particular  fund." 


§  22  POST  V.  KINZUA  HEMLOCK   RY.   CO.  [§  3] 

171  Pennsylvania  State,  615.  —  1S95. 

Assumpsit  by  the  indorsee  of  an  instrument  in  writing  against  the 
maker.  The  trial  court  ruled  the  instrument  non-negotiable,  and 
that  the  indorsee  could  not  maintain  this  action  upon  it  in  his  own 
name  so  as  to  exclude  any  defenses  the  maker  may  have.  Plaintiff 
appealed. 

'  See  Neg.  Inst.  L.,  §  95  [56].  —  Ed. 

''  Accord:  Cltasc  v.  Bflinnan,  10  Daly  (N.  Y.)  344.  Contra:  Jarvisx.  Wilkins, 
7  M.  &  W.  410,  where  the  instrument  read:  "  I  undertake  to  pay  A.  B.  the  sum 
of  ^645.,  for  a  suit  of,  ordered  by  Daniel  Page."  Fletcher  v.  Thoinpsoii,  55  N. 
H.  308.      See  Post  V.  Kinzica,  etc.,  Co.,  post.  —  Ed. 

NEOOT.   INSTRUMENTS —  I3 


194  FORM    REQUIRED.  [ART.  II. 

The  instrument  is  as  follows: 
250.00.  Kane,  Pa.,  March  5th,  1891. 

On  the  first  day  of  July,  1S91,  without  grace,  there  will  be  due  to  the 
American  Car  &  Equipment  Company  or  order  two  hundred  and  fifty  dollars  for 
rental  of  rolling  stock,  under  contract  of  lease  and  conditional  sale  of  even  date 
herewith,  payable  at  the  office  of  the  American  Car  and  Equipment  Company 
in  the  city  of  New  York,  with  interest  at  6  per  cent,  per  annum  added. 

KiNZUA  Hemlock  R.  R.  Co.,  By  Thos.  L.  Kk^y.,  President. 
Series  B.  87. 
No.  I  due  June  ist,  iSgr. 
[Endorsed  on  the  back^ : 

The  American  Car  and  Equipment  Company. 

S.  L.  Mitchell,  Treas. 

Opinion  by  Mr.  Justice  McCollum,  November  4,  1895: — The 
single  question  in  this  case  is  whether  the  instrument  declared  upon 
is  a  negotiable  promissory  note.  If  it  is  the  plaintiffs  are  entitled  to 
maintain  their  suit  as  it  was  brought,  and  the  learned  court  below 
erred  in  the  ruling  complained  of  in  the  first  specification.  If  it  is 
not,  both  specifications  must  be  overruled.  In  passing  upon  the 
question  of  the  negotiability  of  the  paper  it  will  be  observed 
that  the  sum  referred  to  in  it  represents  rent  to  accrue  under 
a  contract  of  lease  and  conditional  sale  of  rolling  stock,  and 
that  the  plaintiffs'  contention,  if  successful,  will  enable  them  to 
avoid  a  defense  available  against  the  payee.  In  other  words,  if  the 
plaintiffs  are  bona  fide  purchasers  of  the  paper  before  maturity,  and 
it  is  negotiable,  they  may  recover  the  sum  named  in  it,  although  the 
maker  may  have  a  good  defense  against  the  payee,  arising  from  the 
latter's  non-compliance  with  the  terms  of  the  contract.  But  for 
the  protection  the  negotiability  of  the  instrument  would  afford  them 
against  such  a  defense  they  might  as  well  have  brought  suit  upon  it, 
or  on  the  contract,  in  the  name  of  the  payee  to  their  use.  We  allude 
to  this,  not  as  a  matter  affecting  the  question  before  us,  but  as 
explanatory  of  what  might  otherwise  seem  to  be  a  merely  technical 
and  unnecessary  contest. 

The  instrument  in  suit  and  the  contract  to  which  it  refers  were 
executed  and  delivered  on  the  same  day,  and  the  former  is  more  in 
the  nature  of  a  statement  of  a  stipulation  in  the  latter  than  of  an 
independent  undertaking  for  a  past  or  present  consideration  to 
pay  a  sum  certain  at  the  time  stated  in  it.  It  says,  in  substance, 
that  under  a  contract  of  lease  and  conditional  sale  "of  even 
date  herewith"  there  will  be  due  to  the  payee  or  order  on  the 
first  of  July,  1891,  for  the  rental  of  rolling  stock,  two  hundred 
and  fifty  dollars  "  with  interest  at  six  per  cent,  per  annum 
added,"  payable  at  the  office  of  the  payee,  in  New  York.  The 
payee  in  the  instrument  on  which  the  action  is  based  was  the  lessor 


II.  4-]  MUST   BE   TO    PAY   A   SUM    CERTAIN.  I95 

in  the  contract,  and  the  sum  to  become  due  on  the  first  of  Jul)'  was 
rental  for  the  rolling  stock  that  was  leased.  If  the  lessor  refused 
to  deliver  the  stock  to  the  lessee  in  accordance  with  the  terms  of  the 
contract  the  rent  reserved  for  the  use  of  it  did  not  become  due  on 
the  first  of  July  or  at  any  time.  What  the  lessee  said  in  the  paper 
in  question  regarding  the  sum  to  become  due  on  the  first  of  July  for 
rental  of  rolling  stock  was  based  on  compliance  with  the  lease,  and 
is  not  applicable  to  a  repudiation  of  it.  We  cannot,  therefore,  regard 
the  paper  in  suit  as  creating  a  liability  independent  of  and  unaffected 
by  the  contract  to  which  it  refers.  We  think  it  embraces  a  contin- 
gency which  renders  it  non-negotiable,  and  if  the  maker  is  liable 
upon  it  to  the  plaintiffs,  or  to  the  payee,  the  liability  is  qualified  and 
measured  by  "  the  contract  of  lease  and  conditional  sale."  Nothing 
is  better  settled  than  the  rule  which  requires  that  an  instrument  to 
be  negotiable  shall  be  free  from  contingencies  and  conditions. 
[Overton  v.  Taylor,  3  Pa.  346;  Sweeny  v.  Thickstun,  77  Pa.  131; 
Woods  V.   North,   84  Pa.    407;  and  Iron  City  Bank  v.   McCord,  139 

Pa.  5---) 

The   specifications  of  error  are   overruled   and  the  judgment  is 
affirmed. 


4.   The  Sum  to  be  Paid  Must  be  Certain. 
{a)    What  amounts  to  certainty  generally. 

§  20  DODGE  V.  EMERSON.  [§  i] 

34  'Maine,  96.  —  1S52. 

Assumpsit,  by  the  indorsee  against  the  makers  of  a  note  payable 
to  the  Protection  Insurance  Company  or  order,  for  "  $271.25,  with 
such  additional  premium  as  may  arise  on  policy  No.  50,  issued  at 
the  Calais  agency." 

Appleton,  J.  —  No  principle  of  law  is  more  fully  established  by 
authority  and  the  universal  concurrence  of  the  commercial  world, 
than  that  to  make  a  written  promise  a  valid  promissory  note,  it  must 
be  for  a  fixed  and  certain,  and  not  for  a  variable  amount.  In  France 
it  is  so  determined  by  the  provisions  of  the  Code  Napoleon.  It  is 
the  recognized  mercantile  law  of  continental  Europe.  In  England 
and  in  this  country,  it  has  received  the  sanction  of  repeated  and 
well-considered  adjudications.  [Story  on  Promissory  Notes,  g  20.) 
Without  this  essential  requisite,  a  written  promise,  though  in  terms 
payable  to  order,  is  to  be  regarded  as  a  simple  contract  and  not 
negotiable. 


196  FORM    REQUIRED.  [ART.  11. 

The  defendants  in  this  case  have  promised  to  pay  two  several 
sums;  one  certain  and  definite,  the  other  uncertain  and  contingent. 
The  defendants'  liability  being  for  both  these  sums,  is  obviously  for 
an  unascertained  and  indefinite  amount. 

It  is  insisted  in  argument,  that  the  plaintiff  may  abandon  all  claim 
for  the  additional  premium,  which  is  uncertain,  and  proceed  only  for 
the  certain  sum  expressed  in  the  contract.  Undoubtedly  he  may 
take  judgment  for  any  sum  less  than  the  amount  due,  and  in  that 
mode  abandon  a  portion  of  his  legal  claims,  but  that  still  leaves  the 
contract  in  its  original  state,  and  can  in  no  way  affect  its  legal  con- 
struction. He  could  not  erase  the  clause  relating  to  the  additional 
premium,  without  thereby  making  such  an  alteration  in  the  instru- 
ment declared  on,  as  would  discharge  the  defendants. 

In  Sjnith  v.  Nightingale  (2  Stark.  R.  375),  the  promise  was  to  pay 
the  payee  sixty-five  pounds  and  all  other  sums  that  may  be  due  him, 
and  it  was  claimed  for  the  plaintiff,  to  whom  the  interest  in  the  con- 
tact had  passed  by  indorsement,  that  he  might  disregard  the  latter 
clause  and  recover  on  the  certain  sum  set  forth  in  his  contract  as 
indorsee,  but  the  Court  decided  otherwise.  [Davis  v.  JVilkiiisoii,  10 
Adol.  &  El.  98.) 

The  inquiry  is  made  by  the  counsel  for  the  plaintiff,  whether  the 

clause  providing  for  the  payment  of  an  additional  sum,  introduced 

after  the  promise  to  pay  the  sum  fixed  and  certain,  controls  that  sum 

so   as  to  make  it  in  any  event  uncertain.     The  amount  due  to  the 

plaintiff  is  uncertain.     Whether  the  contract  is  to  be  regarded  as  a 

promise  to  pay  one  sum,  which  shall  be  the  aggregate  composed  of 

a  certain  and  of   an   uncertain   sum,  the   amount  of   which  is  to  be 

ascertained  at  some  subsequent   time,  or  as  a  promise  to  pay  two 

sums,  one  fixed  and   the  other  uncertain,   is  perfectly  immaterial. 

In  either  case  there  is  no  precise  and  ascertained  amount  due  by  the 

contract,  and  it  cannot  be  regarded  as  a  promissory  note.     If  it  was 

not    in    its    origin,  it    cannot   be  made   one  by   any   abandonment, 

which  the  plaintiff  may  deem  it  advisable  to  make,  of  any  portion 

of  the  sum  due  him.     The   contract  declared  on  not  being  in  its 

character  negotiable,  the  action  cannot  be  maintained  by  the  present 

plaintiff". 

Plaintiff  nonsuit.' 

'  "  $350,  and  also  such  additional  premium  as  may  become  due  on  said  policy," 
is  uncertain.  Palmer  v.  JFard,  6  Gray  (Mass.)  340;  Marrctt  v.  Equitable  Ins. 
Co.,  54  Me.  537. 

"  $1,000,  or  what  might  be  due  after  deducting  all  advances  and  expenses,"  is 
uncertain.      Cushman  v.  Haynes,  20  Pick.  (Mass.)  132. 

),  subject  to  the   provisions  contained   in  an  agreement  this  day  made 


II.  4-]  MUST   BE   TO    PAY   A    SUM    CERTAIN.  I97 

§  20  SMITH  V.  CLOPTON.  [§  i] 

4  Texas,  109.  —  1849. 

Appeal  from  Bastrop.  Clopton,  as  bearer  of  the  following  instru- 
ment in  writing,  sued  Smith  in  a  Justice's  Court: 

On  or  before  the  first  day  of  January  next,  I  promise  to  pay  W.  B.  Waldrop, 
or  bearer,  one  dollar  and  fifty  cents  for  each  and  every  acre  of  land  which  lies 
north  (that  is  to  say)  above  Walnut  Creek,  which  said  Waldrop  has  this  day 
sold  to  me,  being  part  of  the  land,  which  was  sold  unto  the  said  Waldrop  by  L. 
C.  Cunningham,  the  said  land  being  the  consideration  of  this  note;  and  if  this 
note  is  not  paid  promptly  at  maturity  it  shall  draw  interest  at  the  rate  of  ten 
per  cent,  per  annum  until  paid. 

Bastrop,  April  15,  1S48.  Thomas  M.  Smith. 

Witness:  L.  C.  Cunningham. 

Since  the  within  was  written,  the  land  has  been  surveyed  and  found  to  be 
sixty-five  acres,  which  will  make  the  within  call  for  $97.50. 

Bastrop,  N'ov.  loth,  1848.  Thomas  M.  Smith. 

Clopton  recovered  judgment  in  the  Justice's  Court,  and  Smith 
appealed  to  the  District  Court,  where  Clopton  again  recovered 
judgment. 

Hemphill,  Ch.  J.  — The  first  position  contended  for  by  appellant 
is  that  the  instrument  sued  on  is  not  a  promissory  note,  and  if  a 
*  promissory  note,  it  is  not,  according  to  the  laws  of  this  State,  nego- 
tiable, nor  does  it  vest  such  rights  in  Clopton  as  are  acquired  by 
the  holders  of  instruments  made  negotiable  by  the  law  merchant  or 
by  statute. 

The  objection  to  its  being  regarded  as  a  promissory  note,  from 
the  circumstance  that  no  precise  sum  was,  in  its  original  formation, 
designated  as  the  amount  to  be  paid,  we  consider  as  obviated  by  the 
fact  that  this  was  ascertained  and  acknowledged  on  the  same  instru- 
ment, under  the  signature  of  the  maker,  before  the  note  arrived  at 
maturity.  This  acknowledgment  conferred  upon  it  certainty  as  to 
the  amount,  the  only  requisite  wanting  to  constitute  it  a  commercial 
negotiable  instrument;  and  from  the  date  of  the  admission,  it 
became  the  promissory  note  recognized   by  our  laws  as  having  the 

between  C  and  myself,"  is  uncertain  where  the  agreement  referred  to  provides 
for  a  contingent  deduction.     Dilley  v.   Van   JVie,  6  Wis.  206. 

$60,  but  $50  if  paid  by  Jan.  ist,  is  uncertain.     Fralick  v.  Norton,  2  Mich.  130. 

$200,  award  of  assessor  of  damages  to  be  subtracted,  and  on  payment  of 
award  note  delivered  up,  is  uncertain,  and  in  the  nature  of  a  penal  bond.  Ellctt 
V.  Eberts.  74  Iowa,  597. 

"  Pay  A  B  for  68  bu.  wheat  in  store  at  three  cents  below  first  quality  wheat," 
is  uncertain.     Lent  v.  Ilodgman,  15  Barb.  (N.  Y.)  274.  —  Ed. 


198  FORM    REQUIRED.  [ART.  II. 

quality  of  negotiability,  and  other  incidents  pertaining  to  mercantile 
paper  by  the  usages  of  the  law  merchant. 

[Omitting  matter  not  relating  to  this  question.] 

The  instrument  sued  on,  having  been  decided  to  be  a  negotiable 
promissory  note,  must  be  presumed  to  have  been  transferred  before 
maturity,  there  being  no  evidence  to  the  contrary,  and  is,  therefore, 
in  the  hands  of  the  plaintiff,  not  subject  to  defenses  which  might 
well  be  pleaded  in  an  action  brought  by  the  payee,  or  assignee  after 
the  note  became  due. 

The  trial  below  was  on  an  appeal  from  a  magistrate.  There  were  no 
pleadings  in  the  case,  nor  was  any  of  the  evidence  taken  admissible, 
except  the  instrument  sued  upon;  which  proved  itself.  There  was 
no  foundation  laid  for  the  introduction  of  the  proof,  by  showing 
such  circumstances  as  would  have  subjected  the  plaintiff  to  the 
equities  which  were  raised  or  supposed  to  exist  against  the  vendor. 

Judgment  affirmed. 


§  20     Mr.   Justice  Bradley  in  PARSONS  v.  JACKSON.     [§  i] 

99  United  States,  434,  43S,  440.  — 1878. 

Each  bond,  on  its  face,  certifies  "  that  the  Vicksburg,  Shreveport, 
and  Texas  Railroad  Company  is  indebted  to  John  Ray,  or  bearer,* 
for  value  received,  in  the  sum  of  either  ^{^225  sterling  or  $1,000 
lawful  money  of  the  United  States  of  America,  to  wit,  ^225  sterling 
if  the  principal  and  interest  are  payable  in  London,  and  $1,000  lawful 
money  of  the  United  States  of  America,  if  the  principal  and  interest 
are  payable  in  New  York  or  New  Orleans,"  etc.  This  is  the  obliga- 
tory part  of  the  instrument,  and  is  necessarily  indeterminate  in  its 
character  without  some  further  designation  of  the  place  at  which  it 
is  to  be  paid.  Each  bond,  further,  on  its  face  declares  that  "  the 
president  of  said  company  is  authorized  to  fix,  by  his  indorsement, 
the  place  of  payment  of  the  principal  and  interest  in  conformity  with 
the  terms  of  this  obligation."  And  on  the  back  of  the  bonds  is 
indorsed  a  printed  blank  in  the  following  words,  to  wit,  "  I  hereby 
agree  that  the  within  bond  and  the  interest  coupons  thereto  attached 
shall  be  payable  in  ."     *     *     * 

The  uncertainty  of  the  amount  payable,  in  the  absence  of  the 
required  indorsement,  is  of  itself  a  defect  which  deprives  these  instru- 
ments of  the  character  of  negotiability.  As  they  stand,  they  amount 
to  a  promise  to  pay  so  many  pounds,  or  so  many  dollars,  —  without 
saying  which.  One  of  the  first  rules  in  regard  to  negotiable  paper 
is  that  the  amount  to  be  paid  must  be  certain,  and  not  be  made  to 


II.  4.]  MUST   BE   TO    PAY   A   SUM    CERTAIN.  I99 

depend  on  a  contingency,  (i  Datiiel,  Neg.  Inst.,  §  53.)  And 
although  it  is  held  that  id  cerium  est  quod  certum  reddi  potest,  —  a 
maxim  which  would  have  given  the  bonds  negotiability  in  this 
instance,  had  the  requisite  indorsement  been  made, — yet,  without 
such  indorsement,  the  uncertainty  remains,  and  operates  as  an 
intrinsic  defect  in  the  security  itself. 


Qi)  Engagement  to  pay  interest:  contingency. 
§  21  PARKER  V.  PLYMELL.  [§  2] 

23  Kansas,  402.  —  1S80. 

Action  by  Parker,  against  Plymell  and  wife,  upon  two  promissory 
notes,  and  a  mortgage  given  as  security  for  their  payment.  The 
facts  are  stated  in  the  opinion.  Trial  at  the  April  Term,  1879,  of 
the  District  Court,  and  judgment  for  the  defendants.  The  plaintiff 
brings  the  case  here. 

The  opinion  of  the  court  was  delivered  by 

Brewer,  J.:  This  was  an  action  on  two  notes,  and  for  a  fore- 
closure of  the  mortgage  given  as  security  for  them.  The  plaintiff 
was  a  bona  fide  holder  for  value,  before  maturity.  No  actual  notice 
of  any  defenses  was  shown.  The  notes  were  negotiable,  unless  and 
save  as  affected  by  the  following  matters.  The  promise  was  to  pay 
interest  at  twelve  per  cent.,  after  maturity;  and  after  this  promise 
were  these  words:  "  If  this  note  is  not  paid  at  maturity,  the  same 
shall  bear  twelve  per  cent,  interest  from  date."  As  a  fact,  there  was 
usury  in  the  inception  of  the  notes.  As  a  conclusion  of  law,  the 
court  held,  that  by  reason  of  the  words  above  quoted,  the  purchaser 
took  the  notes,  charged  with  notice  of  the  usury;  and  this  presents 
the  sole  question  for  our  consideration. 

Clearly,  these  words  do  not  destroy  the  negotiability  of  the  paper. 

They  do  not  leave  uncertain  either  the  fact,  the  time,  or  the 
amount  of  payment.  Indeed,  up  to  and  including  the  maturity  of 
the  notes,  they  are  entirely  without  force.  They  became  operative 
only  after  the  notes  are  dishonored  and  have  ceased  to  be  negotiable, 
and  then  there  is  no  uncertainty  in  the  manner  or  extent  of  their 
operation.  They  create,  as  it  were,  a  penalty  for  non-payment  at 
maturity,  and  a  penalty  the  amount  of  which  is  definite,  certain 
and  fixed.  In  this  respect,  they  are  even  less  objectionable  than  the 
stipulation  concerning  attorney-fees,  which  was  considered  in  the 
case  of  Seaton  v.  Scovill  (18  Kans.  433),  for  there  the  amount  was  not 


200  FORM    REQUIRED.  [ART.  II. 

fixed  and  named,  but  the  stipulation  was  for  reasonable  attorney- 
fees.  (See  also  i  Daniel  on  Neg.  Insts.,  §§  53,  54,  61,  62;  Tholen  v. 
Duffy,  7  Kans.  410;    Goulds.  Bishop  Hill  Co.,  35  111.  325.) 

Now  if  these  words  do  not  affect  the  negotiability  of  the  paper, 
can  they  restrict  the  amount  of  recovery  as  against  a  bona  fide  holder 
for  value  before  maturity?  Is  not  the  very  essence  of  negotiability, 
that  such  a  holder  may  rely  upon  the  face  of  the  contract,  and  recover 
according  to  its  terms,  any  transaction  between  the  maker  and  payee 
to  the  contrary  notwithstanding?  The  court  held  that  these  words 
imparted  notice  of  usury.  But  how  ?  The  penalty  is  not  recoverable 
as  interest,  and  if  it  were  in  this  case,  it  is  not  usurious.  Grant  that 
the  courts  will  not  tolerate  a  penalty  which  is  a  mere  cover  for  usury, 
and  still  this  penalty  would  have  to  be  sustained,  for  it  only  calls  for 
twelve  per  cent,  interest.  This  stipulation  provides  for  twelve  per 
cent,  interest  before  maturity,  as  another  stipulation  does  for  twelve 
per  cent,  interest  after  maturity.  Nowhere  in  the  note  is  more  than 
twelve  per  cent,  named.  The  effect  of  these  stipulations  is  no  more 
than  that  of  a  promise  to  pay  twelve  per  cent,  from  date  until  paid, 
with  a  proviso  that  if  promptly  paid  at  maturity,  no  interest  will  be 
required.  It  may  be  said  that  where  a  note  calls  for  no  interest  till 
after  maturity,  the  presumption  is  that  the  interest  was  taken  out 
in  advance.  Whatever  may  be  true  of  bank  paper,  we  think  no  such 
presumption  of  law  exists  as  to  ordinary  notes.  Generally  it  may 
be  true  that  such  is  the  case,  but  it  is  not  always  so.  The  loan  may 
be  a  friendly  one,  and  only  the  certainty  of  prompt  payment  a 
matter  desired  by  the  lender,  or  there  may  be  no  loan  at  all,  but  a 
sale  of  property  on  time  with  security,  and  the  only  purpose  of  the 
penalty  to  secure  promptness  in  payment.  The  note  does  not  say 
the  interest  has  been  taken  out  in  advance,  nor  is  such  fact  neces- 
sarily to  be  presumed  from  its  terms.  The  utmost  that  can  be  said  is 
that  the  language  suggests  the  probability  of  such  a  fact,  but  this  is 
far  from  imparting  notice  to  a  bona  fide  purchaser,  or  operative  to 
restrict  his  right  of  recovery. 

The  judgment  will  be  reversed,  and  the  case  remanded  with 
instructions  to  render  judgment  for  the  full  amount  of  principal  and 
interest  due  upon  the  face  of  the  papers. 

All  the  justices  concurring.' 

'Accord;  Crump  v.  Berdan,  97  Mich.  297;  Hope  v.  Barker,  112  Mo.  338.  An 
option  on  the  part  of  the  debtor  to  pay  interest  in  paper  money  at  7  3-10  per 
cent,  or  in  gold  at  6  per  cent,  does  not  destroy  negotiability.  Dinsmore  v. 
Duncan,  57  N.  Y.  573.  —  Ed. 


II.  4-]  MUST   BE   TO    PAY   A   SUM    CERTAIN.  201 

§  21  SMITH  V.  CRANE.  [§  2] 

33  Minnesota,  144.  —  1SS5. 

Action  by  indorsee  against  maker.  Court  charged  tliat  "  tlie 
instrument  offered  in  evidence  is  not  a  promissory  note,  but  is  sub- 
ject to  all  equities  existing  between  the  defendant  and  D.  M. 
Osborne  &  Co.,  whether  it  was  assigned  before  or  after  maturity." 
Defendant  has  a  verdict,  and  plaintiff  appeals  from  an  order  refusing 
a  new  trial. 

Berry,  J. :  — 

$100.  Good  Thunder,  y«//r  24,  1SS2. 

For  valu-  received  on  or  before  the  first  day  of  January,  1SS4,  I,  or  we,  or 
cither  of  us,  promise  to  pay  to  the  order  of  D.  M.  Osborne  and  Co.  the  sum  of 
one  hundred  dollars,  at  the  office  of  Gebhard  and  Moore,  in  Mankato,  with 
interest  at  ten  per  cent,  per  annum  from  date  until  paid ;  seven,  if  paid  when  due. 

W.  J.   B.  Crane. 

A  negotiable  promissory  note  must  be  certain  as  to  amount,  {/ones 
V.  Radatz,  27  Minn.  240.)  It  is  so  certain  when  the  sum  to  become 
absolutely  payable  upon  it  at  any  given  time  is  ascertainable  upon 
its  face,  (i  Daniel,  Neg.  Inst.,  §  53;  Toivne  v.  Rice,  122  ]\Iass.  67; 
Jones  V.  Radatz,  supra.) 

The    defendants'    position    is    that   the    foregoing   instrument    is 
rendered  uncertain  as  to  amount  by  the  interest  clause,  and  therefore 
is  not  a  negotiable  promissory  note.     As  to  the  legal  effect  of  such  a 
clause  the  authorities  disagree.     Some  hold  that  the  contract  reserves 
the  higher  rate  of  interest,  with  a  provision  for  its  abatement,  upon  a 
condition    to    be    performed,    and    that,    therefore,    the    difference 
between  the  two  rates  is  not  a  penalty,   but  the   contract  is  to  be 
enforced  according  to  its  literal  terms.     The  cases  holding  this  view 
rest  upon  NicJiolls  v.  Maynard  (3  Atk.  519).     (See  Walmesley  v.  Booth, 
Barn.  Ch.  478,  481;  Bonafous  v.  Rybot,  3  Burr.  1370;  Waller  v.  Long, 
6  Munf.  (Va.)  71.)     Other  authorities  hold  that  the  clause   is  the 
same  in  effect  SiS  if  it  had  reserved  the  lower  rate  of  interest,  with  a 
provision  that  if  the  indebtedness  is  not  paid  at  maturity,  interest 
shall  run  at  a  higher  rate.     {Seton  v.  Slade,  7  Ves.  265,  and  see  Stan- 
hope V.  Manners,  2  Eden,  197;  Brockway  v.  dark,  6  Ohio,  45;  Long- 
worth  V.  Askren,  15  Ohio  St.,  370;  Brown\.  Barkham,  i  P.  Wms.  652.) 
If  this  be  the  true  construction  of  the  clause,  it  is  generally  agreed 
that  the  difference  between  the  two  rates  is  to  be  treated  as  a  penalty. 
{Talcottv.  Marston,  3  Minn.  238,  (339);  Neiucllv.  Houlton,  22  Minn. 
19;  and  cases  last  cited.) 

In  our  opinion  the  view  taken  by  the  authorities  last  mentioned  as 
to  the  legal  effect  of  the  interest  clause  under  consideration,  is  the 


202  FORM    REQUIRED.  [ART.  II. 

more  sensible,  and  most  in  accordance  witli  what  would  seem  to  be 
the  real  object  of  the  parties  to  the  contract.  What  the  payee  really 
wants  is  his  money  at  the  due  date  of  the  contract,  and  to  secure 
this  he  holds  an  increase  of  the  rate  of  interest  over  the  debtor's 
head.  In  other  words  the  increase  is  a  penalty  for  the  debtor's 
delinquency.  Treating  the  increase  as  tx  penalty^  it  follows,  under  the 
decisions  of  the  court  before  cited,  that  the  note  in  suit  will  in  law 
draw  the  same  rate  of  interest  before  as  after  maturity,  — that  is 
to  say,  7  per  cent., — and  that,  therefore  (whatever  might  be  the 
case  if  the  interest  clause  were  upheld  according  to  its  literal  terms), 
the  sum  absolutely  payable  upon  the  instrument  at  any  given  time  is 
thus  made  certain,  as  the  principal,  and  7  per  cent,  interest.     *    *    * 

Order  reversed  and  new  trial  directed.' 


(<:)  Engagement  to  pay  by  stated  instalments;  contingent  ifistalments. 

§  21  COOKE  V.  HORN.  [§  2] 

29  Law  Times,  N.  S.  (Q.  B.)  369.  —  1S73. 

This  was  an  action  upon  a  promissory  note,  tried  before  Hony- 
man,  J.,  at  the  York  Summer  Assizes.  A  verdict  of  175/.  5^.  lod. 
was  found  for  the  plaintiff,  leave  being  reserved  to  the  defendant 
to  move  to  enter  a  verdict  for  him,  on  the  ground  that  the  note  was 
not  good. 

The  form  of  the  note  was  as  follows:  — 

^170.  25th  April,  1S72. 

We  promise  to  pay  to  Messrs.  M.  H.  Cooke  and  Co.  170/.,  with  interest 
thereon  at  the  rate  of  5/.  per  cent,  per  annum,  as  follows:  the  first  payment,  to 
wit,  40/..  or  more,  to  be  made  on  the  ist  Feb.  1873,  and  5/.  on  the  first  day  of 
each  month  following  until  this  note  and  interest  shall  be  fully  satisfied.  And 
in  case  default  shall  be  made  in  payment  of  any  of  the  said  instalments,  the 
full  amount  then  remaining  due  in  respect  of  the  said  note  and  interest  shall  be 
forthwith  payable. 

The  note  was  signed  by  the  defendant  and  one  John  Horn,  since 
deceased. 

Blackburn,  J.  —  I  do  not  thing  there  should  be  any  rule  in  this 
case.  The  objection  to  the  note  is,  that  if  the  first  payment  were 
more  than  40/.,  which  the  note  provides  it  inight  be,  the  subsequent 
instalments  and  the  final  time  of  payment  would  be  indefinite.  The 
amount  of  the  note,  however,  is  certain,  and  any  variation  in  the 

'  For  view  as  to  treating  such  stipulations  as  a  penalty,  see  post,  p.  217, 
note  2.  —  Ed. 


II.  4-]  MUST   BE   TO    PAY   A   SUM    CERTAIN.  203 

time  will  depend  only  upon  the  defendant.  No  case  has  been  cited 
which  is  an  authority  against  this  note;  and  by  analogy  with  other 
objections,  this  one,  as  it  seems  to  me,  ought  not  to  prevail.  I  do 
not  see  why  a  stipulation  which  enables  the  maker  of  a  note  to  reduce 
his  liability  for  interest,  should  prevent  the  instrument  containing 
it  from  being  a  promissory  note. 

Quain  and  Archibald,  JJ.,  concurred. 

Rule  refused. 


§  21         RIKER  V.  SPRAGUE  MANUFACTURING  CO.       [§  2] 

14  Rhode  Island,  402.  —  1S84. 

TiLLiNGHAST,  J.  — This  case  and  the  following  one'  are  actions, 
this  case  against  the  maker  and  indorsers,  and  the  following  one 
against  the  indorsers  only,  of  a  large  number  of  promissory  notes, 
set  out  and  declared  on  by  the  plaintiffs  as  negotiable,  and  are  tried 
together,  by  agreement  of  parties,  upon  the  defendant's  petition  for 
a  new  trial,  in  each  case  on  the  ground  of  certain  alleged  misrulings  by 
the  court  at  the  jury  trials,  and  also  that  the  verdict  was  against  the 
evidence  in  each  case.  The  questions  raised  by  the  exceptions  to 
the  rulings  of  the  court  in  this  case,  in  so  far  as  they  were  relied  on 
at  the  trial,  a.ve  Ji?-si,  whether  the  notes  declared  on  are  negotiable; 
and  second,  whether  there  was  a  waiver  by  the  indorsers  of  demand 
and  notice,  which  excused  the  plaintiffs  from  proof  thereof  at  the 
trial  to  the  jury. 

The  notes  are  all  in  the  following  form,  which  is  a  copy  of  one  of 
the  notes  in  suit: 

E.  No. 
$1,000  Providence,  November  ist,  1873. 

Three  years  from  January  ist,  1S74.  for  value  received,  the  A.  &  W.  Sprague 
Manufacturing  Company  promise  to  pay  to  the  order  of  A.  &  W.  Sprague  One 
Thousand  Dollars,  with  interest  from  January  i,  1874,  payable  semi-annually, 
at  the  rate  of  seven  and  three-tenths  percent,  per  annum,  till  said  principal  sum 
is  paid,  whether  at  or  after  maturity;  and  all  instalments  of  interest  in  arrear 
shall  bear  interest  at  the  rate  aforesaid  till  paid,  but  reserving  the  right  to  pay 
this  note  before  maturity  in  instalments  of  not  less  than  five  (5)  per  cent,  of  the 
principal  thereof,  at  any  time  the  semi-annual  interest  becomes  payable.  Prin- 
cipal and  interest  payable  at  their  place  of  business  in  said  Providence. 

Amasa  Sprague, 
Countersigned,  Treasurer. 

Z.  Chafee,   Trustee. 
[Indorsed] 

A.  &  W.  Sprague. 

'  Post,  p.  243.  —  Ed. 


204  FORM    REQUIRED.  [ART.  II. 

The  defendants  contend  that  said  notes  are  not  negotiable  for  two 
reasons,  namely:  first,  because  the  time  of  payment  is  uncertain; 
and  second,  because  the  amount  to  be  paid  is  also  uncertain. 

If  either  of  these  grounds  is  established,  the  notes  must  be  held 
not  negotiable,  and  this  action,  as  against  the  indorsers  at  least, 
cannot  be  maintained;  for  it  is  elementary  law  that  amongst  the 
essential  requisites  of  a  negotiable  promissory  note  are  certainty  as 
to  the  amount  to  be  paid,  and  certainty  as  to  the  time  when  the  pay- 
ment is  to  be  made. 

First,  then,  are  the  notes  certain  as  to  amount  ?  They  are  each 
for  a  definite,  fixed,  and  certain  sum,  and  the  payment  of  this  sum 
is  not  subject  to  any  uncertainty  or  contingency.  But  the  defend- 
ants urge  that  by  reason  of  the  reserved  right  on  the  part  of  the 
maker  expressed  in  the  body  of  the  note,  to  pay  the  same  before 
maturity,  in  instalments  of  not  less  than  five  per  cent,  of  the  princi- 
pal thereof,  at  any  time  the  semi-annual  interest  becomes  payable, 
the  amount  of  the  note  is  rendered  uncertain.  We  fail  to  see  how 
the  amount  to  be  paid  becomes  any  less  certain  by  reason  of  this 
reservation.  Suppose  part  payment  to  be  made  at  one  of  the  stated 
periods  provided  therefor:  that  is  a  payment  on  the  principal  of  the 
note,  and  simply  reduces  said  principal  by  so  much  as  is  paid,  leav- 
ing the  note  as  definite  as  to  amount  as  it  was  before;  so  that 
although  the  amount  actually  due  upon  the  principal  of  one  of 
these  notes  at  a  given  time  in  its  existence  might  be  different  from 
the  amount  due  at  some  other  time,  yet  it  would  always  be  a  fixed 
and  certain  amount,  and  the  total  sum  payable  would  not  be  changed. 
The  object  of  the  law,  therefore,  in  requiring  certainty  as  to  amount 
as  well  as  to  time  of  payment,  which  is  to  give  to  negotiable  paper 
as  far  as  possible  the  quality  of  a  circulating  medium,  like  money, 
and  practically  to  make  it  represent  money,  is  fully  met  in  a  note  in 
this  form. 

The  cases  in  which  it  has  been  held  that  there  was  not  that  cer- 
tainty as  to  amount  to  be  paid  which  the  law  requires  in  negotiable 
paper  are  those,  in  the  main,  where  the  principal  of  the  note  could 
not  be  determined  by  anything  which  appeared  therein:  as  where  a 
promise  was  made  to  pay  a  certain  sum,  "  and  all  fines  according  to 
rule  "  [Ayrey  v.  Fearnsides,  4  M.  &  W.  16S);  or  a  certain  sum,  and 
also  "  all  other  sums  which  may  be  due  "  {Smith  v.  Nightingale,  2 
Stark.  375);  or  a  certain  sum  with  interest,  and  also  to  pay  "  the 
demands  of  the  sick  club  at,  etc.,  in  part  of  interest"  {^Bolton  v. 
Diigdale,  4  B.  &  Ad.  619;  Davies  v.  Wilkinson,  10  A.  &  E.  98);  or  a 
certain  sum  deducting  what  interest  or  money  A.  may  owe  the 
maker  [Barlow    v.   Broadhursi,   4  Moore,   471);    or  a    certain    sum 


II.  4-]  MUST   BE   TO    PAY   A   SUM    CERTAIN.  205 

together  with  all  cost  of  collection  including  attorney's  fees  {Jones 
V.  Radatz,  27  Minn.  240;  Maryland  Fertilizing  and  Manufac.  Co.  v. 
JVewman,  60  Md.  584;  Johnston  v.  Speer,  92  Pa.  St.  227.)  These, 
and  many  others  of  like  character,  illustrate  and  make  plain  what 
is  meant  by  the  term  "  uncertain  as  to  amount,"  as  applied  to 
promissory  notes,  and  what  degree  of  certainty  is  essential  to  render 
a  note  negotiable. 

That  no  such  uncertainty  exists,  however,  in  the  notes  declared 
on  in  the  case  at  bar,  is  clearly  manifest  upon  the  most  casual 
inspection  thereof;  and  we  conclude  that,  so  far  as  certainty  in 
amount  is  concerned,  they  unquestionably  come  within  the  rule 
w^hich  the  adjudged  cases  make. 

Second,  then,  are  they  certain  as  to  time  of  payment  ?'  And  upon 
this  point  let  us  first  ascertain  what  degree  of  certainty  is  meant  by 
this  expression.  We  think  the  rule  of  law  is  clearly  this,  namely: 
' '  that  if  the  time  of  payment  tiamed  iii  the  note  must  certainly  come, 
although  the  precise  day  may  not  be  specified  therein,  it  is  sufficiently  certain 
as  to  time."  In  other  words,  it  must  not  depend  upon  any  contingency: 
as  "when  A.  shall  marry,"  (^Pearson  v.  Garrett,  4  Mod.  242);  or 
when  a  certain  ship  shall  arrive  (Coolidgex.  Ruggles,  15  Mass.  387; 
Grant  v.  Wood,  12  Gray,  220;  Palmer  v.  Pratt,  2  Bing.  185);  or 
when  a  certain  suit  is  determined  [Sheltonw  Bruce,  9  Yerg.  24;  see, 
also,  Woodbury,  Williams  and  English  v.  Roberts,  59  Iowa,  348.)  And 
here  the  maxim,  Id  certum  est  qtiod  certujn  reddi  potest,  is  applicable, 
although  perhaps  it  is  not  as  to  the  amount. 

So  in  Cota  v.  Buck  (7  Met.  588),  it  was  held,  Shaw,  C.  J.,  deliver- 
ing the  opinion  of  the  court,  that  a  note  in  the  following  form, 
namely:  "  For  value  received  I  promise  to  pay  J.  P.,  or  bearer, 
$570.50,  it  being  for  property  I  purchased  of  him  in  value  at  this 
date,  as  being  payable  as  soon  as  can  be  realized  of  the  above  amount 
for  the  said  property  I  have  this  day  purchased  of  said  P.,  which  is 
to  be  paid  in  the  course  of  the  season  now  coming,"  was  a  negotia- 
ble promissory  note,  on  the  ground  that  it  was  payable  at  all  events 
within  a  limited  time,  namely,  "the  coming  season,"  and  that 
whether  that  meant  "harvest  time  or  the  end  of  the  year,  it  must 
come  by  the  mere  lapse  of  time,  and  that  must  be  the  ultimate  limit 
of  the  time  of  payment." 

So,  also,  in  Curtis  v.  Horn  (58  N.  H.  504),  a  note  payable  "  on  or 
before  the  first  day  of  May  next,"  was  held  to  be  negotiable.  In 
delivering  the  opinion  of  the  court  in  that  case,  Justice  Bingham 
said:     "  It  is  now  the  common  law,  that  where  the  payment  is  made 

'  See  Neg.  Inst.  L.,  §  23  [4].  —  Ed. 


206  FORM    REQUIRED.  [ART.  II. 

to  depend  upon  an  event  that  is  certain  to  come,  and  uncertain  only 
in  regard  to  the  time  when  it  will  take  place,  the  note  or  bill  is 
negotiable."  In  Mattison  v.  Marks  (31  Mich.  421),  it  was  held  that 
a  promise  to  pay  "on  or  before  "  a  day  named  stated  the  time  for 
payment  with  sufficient  certainty.  la  that  case  Cooley,  J.,  said: 
"  The  legal  rights  of  the  holder  are  clear  and  certain;  the  note  is 
due  at  a  time  fixed,  and  is  not  due  before.  True,  the  maker  may 
pay  sooner  if  he  shall  choose,  but  this  option,  if  exercised,  would  be 
a  payment  in  advance  of  the  legal  liability  to  pay,  and  nothing  more. 
Notes  like  this  are  common  in  commercial  transactions,  and  we  are 
not  aware  that  their  negotiable  quality  is  ever  questioned  in  business 
dealings."  (See,  also,  Edwards  on  Bills  and  Notes,  142;  Story  on 
Promissory  Notes,  §  27;  Wheatley  v.  Williams^  M.  &  W.  533;  Ernst 
V.  Steckman,  74  Pa.  St.  13;  Daniel  on  Neg.  Inst.,  §§  43,  48.) 

Indeed,  the  cases  have  gone  so  far  in  this  direction  as  to  hold  that 
a  note  payable  within  a  limited  time  after  the  death  of  a  person 
named  is  sufficiently  certain  as  to  time.  {Cooke  v.  Cole/ian,  2 
Strange,  1217;  Colehan  v.  Cooke,  Willes,  393.)  So,  also,  it  has  been 
repeatedly  held  that  notes  payable  in  instalments  at  fixed  dates  are 
negotiable.  {Van  Buskirk  v.  Day,  32  111.  260;  Carton  v.  Keneaty,  12 
M.  &  W.  139.) 

The  cases  of  JVayv.  Sinitk  (iii  Mass.  523),  and  Stnltsv.  Silva  (119 
Mass.  137),  cited  by  the  defendants,  seem  to  support  their  position 
in  the  case  at  bar;  but  we  prefer  the  reasoning  of  the  court  in  Cota 
v.  Buck,  ante,  to  that  given  in  the  subsequent  case  of  Hubbard  v. 
Mosely  (11  Gray,  170),  upon  which  these  cases  seem  to  rest. 

The  case  of  Carlos  v.  Fancourt  (5  Term.  Rep.  482),  cited  by  the 
defendants,  was  one  in  which  the  note  was  made  payable  out  of  a 
fund  that  should  arise  from  the  sale  of  certain  property,  and  was 
therefore  held  not  negotiable  because  not  payable  at  all  events. 
It  is  in  harmony  with  nearly  all  of  the  more  modern  decisions  upon 
that  point,  and  doubtless  states  the  law  correctly.  {Story  on  Prom. 
Notes,  §  25.)  But  we  do  not  understand  it  to  be  seriously  claimed 
in  the  case  at  bar,  nor  do  we  think  it  could  be  successfully  claimed, 
that  the  notes  are  necessarily  payable  out  of  any  particular  fund  or 
property;  or,  in  other  words,  that  the  payment  thereof  is  based  upon 
any  contingency  whatever. 

The  notes  in  suit  are  made  payable  three  years  from  January 
I,  1874,  with  the  reserved  right  on  the  part  of  the  maker  to  pay  the 
same  before  maturity,  in  part  or  in  whole,  at  any  time  when  the 
semi-annual  interest  becomes  payable.  They  are  payable  at  all 
events  within  a  limited  time,  and  payment  cannot  be  enforced  until 
the  expiration  of  that  time;  but  the  maker  reserves  an  option  within 


II.  4.1  MUST   BE   TO    PAY   A   SUM   CERTAIN.  20/ 

that  limit  of  which  he  may  avail  himself  if  he  sees  fit.  But  even  this 
option  cannot  be  exercised  except  at  certain  periods  which  are 
definitely  expressed  in  the  notes. 

We  think  that  a  note  is  negotiable  if  one  certain  time  of  payment 
is  fixed,  although  the  option  of  another  time  of  payment  be  given. 

As  the  notes  in  suit  come  clearly  within  both  the  letter  and  spirit 
of  the  rule  which  we  have  stated,  we  decide  that  they  are  negotiable 
promissory  notes. 

[Omitting  portion  on  waiver  of  demand  and  notice.] 

It  therefore  follows  that  the  notes  were  properly  admitted  in  evi- 
dence against  the  indorsers;  and,  there  being  no  other  defense  than 
that  concerning  the  negotiability  of  the  notes,  which  we  have  already 
disposed  of,  that  it  was  the  plain  duty  of  the  court  to  direct  a  verdict 
for  the  plaintiffs.  The  petition  for  a  new  trial  must,  therefore,  be 
denied,  and  judgment  entered  on  the  verdict. 

Petition  dismissed.' 


§  21  SAUNDERS  V.  MCCARTHY.  [§  2] 

8  Allen  (M.a.ss.),  42.  —  1864. 

Contract  on  a  promissory  note  for  $825,  dated  Oct.  7,  1857, 
payable  as  follows:  "  One  hundred  dollars  on  the  first  day  of 
March,  A.  D.,  1858,  and  the  balance  in  two  years  from  this  date, 
with  interest  from  the  first  day  of  November  next  on  the  said  sum." 
The  writ  was  dated  Nov.  13,  1858,  and  was  brought  to  recover  the 
first  instalment.  The  note  bore  this  indorsement:  "  Nov.  19,  1859. 
Received  on  within,  $488,  amount  received  on  sale  of  personal  prop- 
erty mortgaged  to  secure  this  note,  and  applied  to  payment  of  last 
instalment." 

The  defendant  contended  that  the  money  received  from  the  sale  of 
the  wood  should  be  applied  first  to  the  payment  of  the  first  instal- 
ment of  the  note;  but  the  judge  ruled  that  "  there  was  no  evidence 
of  the  amount  for  which  the  wood  was  sold,  except  what  might  be 
inferred  from  the  indorsement  on  the  note,  and  that  the  amount  so 
indorsed  should  be  applied  to  both  instalments  in  proportion  as  the 
instalments  bore  to  each  other;  "  and  he  ordered  a  verdict  for  the 
plaintiff  for  the  sum  of  $181.94.     The  defendant  alleged  exceptions. 


'  $50,  to  be  paid  in  such  instalments  and  at  such  times  as  the  directors  of  said 
company  may,  from  time  to  time  assess  or  require,  is  a  promissory  note. 
White  V.  Smith,  77  111.  351;  Goshen  Turnpike  Co.  v.  Hurtin,^  Johns.  (N.  Y.)  217. 
But  see  McClelland  v.  Xorfolk  Southern  R.  Co.,  no  N.  Y.  469,  475-6.  —  Ed. 


208  FORM    REQUIRED.  [ART.  II. 

Chapman,  J.  —  The  first  question  to  be  determined  is,  the  amount 
which,  independently  of  payments,  should  be  recovered  in  this  suit. 
When  the  action  was  commenced,  the  sum  of  $ioo  had  become  due, 
but  the  balance  of  the  principal  was  not  due.  As  to  the  interest, 
by  the  terms  of  the  note  it  was  payable  on  the  whole  note,  including 
the  $ioo,  from  November  i,  1857.  But  it  was  not  to  be  paid  annu- 
ally, and  therefore  no  interest  became  due  on  the  balance  of  the 
principal  until  the  principal  itself  became  due;  so  that  the  amount 
to  be  recovered  in  this  action,  disregarding  payments,  is  the  sum 
of  $100,  with  interest  thereon  from  November  i,  1857.     *     *     * 

The  remaining  question  relates  to  the  payments,  and  the  proper 
application  of  them.  As  the  whole  note  was  due  at  the  date  of  the 
indorsement,  the  plaintiff  had  a  right  to  appropriate  the  amount  he 
received  to  either  instalment,  at  his  option.  (^AUen  v.  Kimball,  23 
Pick.  473.)  It  cannot  be  considered  as  a  payment  by  process  of 
law  or  hi  invifum,  like  payment  by  levy  of  an  execution,  as  was  the 
case  in  Blackstone  Batik  v.  Hill  (10  Pick.  129).  But  it  was  paid  by 
the  sale  of  property  under  an  agreement  with  the  defendant,  in 
which  the  defendant  reserved  no  right  to  make  the  appropriation. 
And  the  rights  of  sureties  are  not  concerned  in  the  present  case,  if 
that  be  a  material  fact.     *     *     * 

Exceptions  sustained. 


{a)  Engagement  that  on  default  the  tvhole  sum  shall  become  due. 

§  21  CARLON  V.  KENEALY.  [§  2] 

12  Meeson  &  Welsby  (Exch.),  139.  —  1843. 

Assumpsit  by  the  indoresee  against  the  maker  of  a  promissory 
note.  The  declaration  stated,  that  the  defendant  on,  etc.,  made  his 
promissory  note  in  writing,  and  delivered  the  same  to  T.  C,  and 
thereby  promised  to  pay  the  said  T.  C,  or  order,  52/.  10^.,  by  two 
equal  instalments,  on  the  ist  of  May,  1843,  and  the  ist  of  November, 
1843,  and  that  the  whole  amount,  52/.  10s.,  should  become  immediately 
payable  on  default  being  made  in  payment  of  the  first  instalment. 
The  declaration  then  averred,  that  T.  C.  endorsed  the  note  to  the 
plaintiff;  that  the  defendant  made  default  in  payment  of  the  first 
instalment,  and  that  he  had  not  paid  the  amount  of  the  note. 

Special  demurrer,  on  the  ground  that,  the  second  instalment  on 
the  said  promissory  note  being  made  payable  by  way  of  condition 
and  penalty  immediately  on  default  in  payment  of  the  first  instal- 
ment, the  note  was  not  made  according  to  the  custom  of  merchants 


II.  4.]  MUST   BE   TO    PAY   A   SUM    CERTAIN.  209 

with  regard  to  inland  bills  of  exchange,  and  consequently  the  title 
thereto,  and  the  right  of  action  thereon,  could  not  pass  by  endorse- 
ment.    Joinder  in  demurrer. 

Lord  Abingek,  C.  B.  —  Suppose  the  case  of  a  note  payable  ten 
days  after  sight  —  there  the  subsequent  parties  do  not  know  ivhen 
they  are  to  be  called  upon.  I  think  there  is  no  ground  for  saying 
the  defendant  is  not  liable. 

Parke,  B.  —  Now,  to  hold  that  actions  could  not  be  maintained 
upon  such  notes  as  this,  would  be  to  impugn  all  the  established 
practice.  Almost  every  note  payable  by  instalments  has  such  a  con- 
dition. It  is  not  a  contingency  —  it  depends  on  the  act  of  the  maker 
himself;  and  on  his  default,  it  becomes  a  promissory  note  for  the 
whole  amount.  The  point  was  in  effect  determined  in  Oridge  v. 
Sherborne  (11  M.  &  W.  374). 

GuRNEY,  B.,  and  Rolfe,  B.,  concurred. 

Judgment  for  the  plaintiff. 


§  21         Mr.  Justice  Harlan  in  CHICAGO  RY.  CO.  v.        [§  2] 
MERCHANTS'   BANK. 

136  United  States,  26S,  2S5-6. — 1889. 

Upon  like  grounds  it  has  been  held  that  the  negotiability  of  the 
note  is  not  affected  by  its  being  made  payable  on  or  before  a  named 
date,  or  in  instalments  of  a  particular  amount.  In  Ackley  School 
Dist.  V.  Hall  (113  U.  S.  135,  140),  it  was  held  that  municipal  bonds, 
issued  under  a  statute  providing  that  they  should  be  payable  at 
the  pleasure  of  the  district  at  any  time  before  due,  were  negotiable; 
for,  the  court  said:  "  By  their  terms,  they  were  payable  at  a  time 
which  must  certainly  arrive;  the  holder  could  not  exact  payment 
before  the  day  fixed  in  the  bonds;  the  debtor  incurred  no  legal  lia- 
bility for  non-payment  until  that  day  passed."  In  Mattison  v.  Marks 
(31  Mich.  421),  which  was  the  case  of  a  note  payable  "  on  or  before  " 
a  day  named,  it  was  said:  "  True,  the  maker  may  pay  sooner  if  he 
shall  choose,  but  this  option,  if  exercised,  would  be  a  payment  in 
advance  of  the  legal  liability  to  pay,  and  nothing  more.  Notes  like 
this  are  common  in  commercial  transactions,  and  we  are  not  aware 
that  their  negotiable  quality  is  ever  questioned  in  business  dealings." 
{Carlonv.  Kenealy,  12  M.  &  W.  139;  Colehan  v.  Willcs,  Willes,  393; 
Jordan  v.  Tate,  19  Ohio  St.  586;  Curtis  v.  Home,  58  N.  H.  504; 
Howard  \.  Simpkins,  60  Georgia,  340;  Protection  Ins.  Co.  v.  Bill,  31 
Conn.  534,   538;   Goodloew.  Taylor,  3  Hawks,  458;  Riker\.  Sprague 

NEGOT.   INSTRUMENTS  —  I4 


2IO  FORM    REQUIRED.  [ART.  II. 

Mfg.  Co.,  14  R.  I.  402.)  In  the  last-named  case  it  was  said  that  if 
the  time  of  payment  named  in  the  note  must  certainly  come, 
although  the  precise  date  may  not  be  specified,  it  is  sufficiently  cer- 
tain as  to  time.  It  was,  consequently,  held  that  a  reservation  in  a 
note  of  the  right  to  pay  it  before  maturity  in  instalments  of  not  less 
than  five  per  cent,  of  the  principal  at  any  time  the  semi-annual 
interest  becomes  payable,  did  not  impair  its  negotiability;  the  court 
observing  that  a  note  is  negotiable  if  one  certain  time  of  payment  is 
fixed,  although  the  option  of  another  time  of  payment  be  given.  In 
view  of  these  authorities,  as  well  as  upon  principle,  we  adjudge  that 
the  negotiability  of  the  notes  in  suit  was  not  affected  by  the  provision 
that  upon  the  failure  of  the  maker  to  pay  any  one  of  the  notes  of 
the  series  to  which  those  in  suit  belonged,  the  rest  should  become 
due  and  payable  to  the  holder. 


§  21  [2]  AViLSON  V.  Campbell  (Mich.),  68  Northwestern  Reporter, 
27S. — 1896.  Montgomery,  J. —  *  *  *  gy^-  \^  jg  contended  that 
the  note  is  not  negotiable,  the  ground  being  that  the  note  gives  an 
option  to  declare  the  whole  amount  due  in  case  of  default  in  pay- 
ment of  an  instalment  of  interest,  and,  while  the  point  is  not  made, 
the  question  suggests  itself  whether  the  similar  provision  contained 
in  the  mortgage,  giving  a  like  option  in  case  of  default  in  payment 
of  taxes,  renders  the  security  non-negotiable,  and,  as  this  question 
is  discussed  in  Brooke  v.  Struthers^  (now  pending  before  us),  6^  N. 
W.  272,  we  consider  both  questions. 

In  Littlefield  v.  Hodge  (6  Mich.  327),  it  was  held  that  a  note  in  form 
negotiable  is  none  the  less  negotiable  when  secured   by  a  mortgage 

'  A  gives  B  a  note  containing  the  clause:  "  This  note  is  of  even  date  with  a 
certain  real  estate  mortgage  made  by  the  maker  hereof  to  said  payee  and  col- 
lateral hereto."  The  mortgage  contains  a  clause  to  the  effect  that  A  will  pay 
all  taxes  levied  "  upon  this  mortgage."  Held,  "A  mortgage,  executed  simulta- 
neously with  a  note,  is  a  part  of  the  contract,  and  they  are  to  be  construed 
together.  ...  In  view  of  the  fact  that  under  the  law  as  it  then  existed 
the  mortgagee  was  liable  to  pay  the  tax  upon  the  mortgage  .  .  .  this  pro- 
vision indicates  a  purpose  by  the  mortgagor  to  undertake  to  relieve  the  mort- 
gagee of  the  obligation,  and  to  that  extent  renders  the  amount  payable  to  or  on 
behalf  of  the  mortgagee  uncertain,  and  the  note  non-negotiable.  If  the  stipula- 
tion were  to  pay  and  discharge  the  taxes  which  the  mortgagor  was  in  law 
bound  to  pay,  it  would  add  nothing  to  the  amount  payable  to  or  for  the  use  of 
the  mortgagee.  Nor  would  it  render  that  amount  uncertain,  or  impair  the 
negotiabilitv  of  the  note." — Brooke  v.  Striithers  (Mich.),  68  N.  W.  Rep.  272 
(two  judges  holding  the  note  non-negotiable  because  the  time  of  payment  is 
uncertain). —  Ed. 


II.  4-]  MUST    BE   TO    PAY   A    SUM    CERTAIN.  211 

containing  provisions  not  repugnant  to  it.  We  apprehend  the  test 
in  such  cases  is,  are  the  provisions  of  the  mortgage  such  as  to  intro- 
duce uncertainty  as  to  time  or  amount  ?  What  elements  of  uncer- 
tainty inconsistent  with  negotiability  here  exist,  if  any  ?  Is  there 
such  uncertainty  as  to  time  as  renders  the  note  non-negotiable?  It 
seems  to  me  very  clear  that  the  answer  must  be  in  the  negative. 
[Citing  and  discussing  authorities,] 

There  is  no  uncertainty  as  to  the  amount  stipulated  to  be  paid. 
The  engagement  to  pay  all  taxes  and  assessm.ents  adds  nothing  to 
the  obligation  of  the  mortgagor.  The  obligation  rests  upon  him 
independently  of  any  stipulation  on  the  subject,  and  his  failure  to 
meet  the  obligation  gives  the  mortgagee  the  right  to  discharge  the 
lien  for  the  purpose  of  preserving  his  security,  and  add  the  amount 
to  the  mortgage  debt.  (2  Jones,  Mortg.  §§  1137,  1683;  Insurance 
Co.  V.  Bulte,  45  Mich.  122,  7  N.  W.  707.)  It  is  a  radical  mistake, 
therefore,  to  consider  this  an  obligation  to  pay  the  mortgagee  so 
much  in  addition  as  the  taxes  and  assessments  amount  to.  The 
obligation  is,  in  the  first  instance,  to  pay  to  the  public  authorities 
authorized  to  receive  the  amount,  and  it  is  only  by  implication,  if  at 
all,  that  the  indebtedness  is  ever  to  be  added  to  the  mortgage. 

At  the  time  this  mortgage  in  question  was  executed  there  was, 
under  the  law,  no  duty  resting  upon  the  mortgagee  to  pay  the  tax 
on  any  portion  of  the  mortgaged  premises,  and  we  think  it  cannot 
be  said  that  subsequent  legislation  which  for  a  time  relieved  the 
mortgagor  of  a  portion  of  the  burden,  and  imposed  it  upon  the  mort- 
gagee, should  be  so  construed  as  to  render  an  instrument  non-nego- 
tiable which  was,  when  made,  negotiable.  As  the  parties  then 
viewed  it,  there  was  no  uncertainty  as  to  the  amount.  The  case 
differs  from  Carmody  v.  Crane  (68  N.  W.  268),  as  in  that  case  the 
contract  itself  contemplated  that  taxes  might  be  imposed  on  the 
mortgagee's  interest,  and  provided  for  their  payment  by  the  mort- 
gagor, and  this  engagement  was  embodied  in  the  note,  bringing  the 
case  directly  within  the  rule  of  Batik  v.  Purdy  (56  Mich.  7,  22  N.  W. 
93),  and  the  cases  which  have  followed  it,  holding  that  it  is  incom- 
petent to  interpolate  into  negotiable  notes  provisions  superadding 
duties  to  be  performed  by  the  maker,  or  additional  obligations  other 
than  the  payment  of  a  sum  certain  at  maturity.  As  has  been  stated 
above,  we  do  not  think  this  limitation  precludes  the  parties  from 
making  provision  for  the  security  of  the  note  by  a  collateral  mort- 
gage. The  clause  in  the  mortgage  is  clearly  not  open  to  a  con- 
struction which  entitles  the  mortgagee  to  foreclose  for  the  amount 
without  himself  paying  the  taxes,  although  he  may,  for  the  mort- 
gagor's default  in  that  regard,  declare  the  whole  amount  due. 


212  FORM    REQUIRED.  [ART.  II. 

{e)  Engagement  to  pay  exchange. 
§  21  HASTINGS  v.  THOMPSON.  [§  2] 

54  Minnesota,  184.  —  1S93. 

Action  by  indorsee  against  maker  to  recover  on  promissory  notes. 
Defendant  answered  setting  up  a  good  defense,  unless  they  were 
negotiable  and  in  the  hands  of  a  bona  fide  indorsee  for  value.  Plain- 
tiff demurred,  and  the  sole  question  presented  was,  whether  the 
insertion  in  the  notes  of  the  words,  "  u<ith  current  exchange  on  New 
York  City,"  rendered  the  notes  non-negotiable  and  open  to  the 
defense.  It  was  admitted  that  the  plaintiff  W3.s  2i  bona  fide  holder 
for  value  before  maturity.  The  trial  court  overruled  the  demurrer 
and  plaintiff  appeals. 

Mitchell,  J.  — The  only  point  raised  on  this  appeal  is  whether 
the  instruments  sued  on  are  promissory  notes,  for,  if  they  are,  they 
are  unquestionably  negotiable  under  the  law  merchant.  They  are 
promises  to  pay  specified  sums  of  money  in  St.  Paul,  "  with  current 
exchange  on  New  York  City;  "  and  the  only  question  is  whether  this 
provision  as  to  exchange  renders  the  sums  required  to  discharge 
them  uncertain,  within  the  meaning  of  the  familiar  rule  that  one  of 
the  essential  qualities  of  a  promissory  note  is  that  the  amount  to  be 
paid  must  be  fixed  and  certain  and  not  contingent.  In  the  defi- 
nitions of  a  promissory  note  or  bill  of  exchange  it  is  generally,  if  not 
always,  stated  that  the  amount  necessary  to  discharge  it  must  be 
ascertainable  from  the  face  of  the  paper  itself,  without  having  to 
refer  to  any  extrinsic  evidence.  Construing  this  definition  literally, 
it  must  be  admitted  that  the  instruments  in  question  do  not  strictly 
fall  withm  it,  for,  of  course,  extrinsic  evidence  must  be  resorted  to 
in  order  to  ascertain  the  rate  of  exchange  at  a  given  time  between 
two  places. 

Upon  examination  of  the  reports  and  text-books  it  is  surprising 
how  little  direct  authority  of  any  value  is  to  be  found  as  to  the 
effect  of  the  addition  of  such  a  provision  to  an  instrument  for 
the  payment  of  money.  Daniel,  Randolph,  and  Tiedeman  state  in 
general  that  such  a  provision  does  not  affect  the  commercial  or 
negotiable  character  of  the  paper,  but  none  of  them  discuss  it  at  any 
length,  and  all  of  them  treat  of  the  question  as  if  it  only  went  to  the 
negotiability  of  the  instruments,  whereas  the  real  question  lies  back 
of  that,  and  is  whether  they  are  promissory  notes  or  bills  of  exchange 
at  all.  {Tied.  Com.  Paper,  §  2^a :  Rand.  Com.  Paper,  §  200;  Daniel, 
Neg.  Inst.,  §  54.)     We  have  found  no  English  case  directly  in  point, 


II.  4-]  MUST   BE   TO    PAY   A   SUM    CERTAIN.  213 

and  none  bearing  on  the  question,  except  Pollard  v.  Harries  (3  Bos. 
&  P.  335),  where  such  an  instrument  was  declared  on  as  a  promissory 
note. 

If  the  question  was  authoritatively  settled  in  the  leading  com- 
mercial states  of  the  Union  or  in  the  federal  courts,  we  would 
be  inclined,  for  the  sake  of  uniformity,  to  follow  their  decisions; 
but  we  have  been  unable  to  find  that  the  Supreme  Court  of  the 
United  States,  or  of  either  Massachusetts,  New  York,  or  Pennsyl- 
vania, has  ever  passed  upon  the  question.  The  only  cases,  state, 
federal,  or  colonial,  which  we  have  found  which  may  be  considered 
as  having  passed  on  the  question,  are  the  following,  which  may  be 
classified  thus:  That  such  instruments  are  not  promissory  notes: 
[Lo7uc  V.  B/iss,  24  111.  16S;  Pcad  v.  McNult\\  12  Rich.  Law,  445; 
Carroll  Co.  Sav.  Bank  v.  Sfrot/icr,  28  S.  C.  504,  6  S.  E.  Rep.  313; 
Palmer  y.  Faliiies/ock,  9  Up.  Can.  C.  P.  172;  Saxton  v.  Stevenson^  23 
Up.  Can.  C.  P.  503;  PhilaJelphia  Bank  v.  Newkirk,  2  Miles,  442; 
Netu  Windsor  Bank  v.  By  mini,  84  N.  C.  24;  Russell  v.  Russell,  i 
MacAr.  267,;  Fitzharris  v.  Leggatt,  10  Mo.  App.  527;  Hiighitt  v. 
Johnson,  28  Fed.  Rep.  865 ;  Windsor  Sav.  Bank  v.  McMahon,  38  Fed. 
Rep.  283).'  That  such  instruments  are  promissory  notes:  [Smith 
V.  Kendall,  9  Mich.  242;  Johnson  v.  Frisbie,  15  Mich.  286;  Leggett 
v.  Jones,  10  Wis.  35;  Morgan  v.  Edtuards,  53  Wis.  599,  (11  N.  W. 
Rep.  21);  Bradley  v.  Lill,  4  Bliss,  473)-"  In  very  few  of  these  cases 
is  the  question  discussed  at  any  length,  or  considered  on  principle. 
Some  of  them  were  decided  by  courts  of  inferior  jurisdiction,  and 
in  others  the  remarks  of  the  court  were  obiter.  Many  of  those  which 
hold  that  such  instruments  are  not  promissory  notes  rest,  without 
discussion,  upon  a  strict  literal  construction  of  the  rule  that  the  sum 
to  be  paid  must  appear  from  the  face  of  the  paper  without  resort  to 
extrinsic  evidence.  About  the  only  cases  where  the  question  is 
discussed  at  any  length  upon  principle  or  authority  are  Smith  v. 
Kendall,  Bradley  v.  Lill,  A/organ  \.  Edwards,  and  Windsor  Sav.  Bank 
V.  MeMahon,  supra. 

In  view  of  this  state  of  the  decisions,  while  in  mere  numbers  the 
decided  weight  of  authority  may  be  in  favor  of  the  contention  of 
the  defendant,  we  feel  at  liberty  to  decide  the  question  in  the  way 
we  deem  most  in  accordance  with  principle  and  business  usages,  and 
in  accordance  with  the  rule  which,  in  view  of  such  usages,  the  lead- 

'  To  the  same  effect:  Second  Nat.  Bank  v.  Basuier,  65  Fed.  Rep.  58  (under 
Dakota  statute);  Flag_q-  v.  School  Dist.,  4  N.  Dak.  30;  Ciilbcrtson  v.  A^c/son,  93 
Iowa,  187;  s.  c.  61  N.  W.  854;  AHcely  v.  Comttiercial  Bank,  15  Ind.  App.  563.  —  En. 

^  To  the  same  effect:  Whittle  v.  Fond  du  Lac  Nat.  Bk.  (Tex.),  26  S.  W.  Rep. 
lioG.  —  En. 


214  FORM    REQUIRED.  [ART.   II. 

ing  courts  of  the  country  are  most  likely  to  finally  settle  down  upoa. 
The  following  are,  in  brief  the  considerations  which  have  led  us  to 
the  conclusion  that  such  instruments  ought  to  be  held  to  be  promis- 
sory notes  under  the  law  merchant: 

1.  The  reason  and  purpose  of  the  rule  that  the  sum  to  be  paid 
must  be  certain  is  that  the  parties  to  the  instrument  may  know  the 
amount  necessary  to  discharge  it,  without  investigating  facts  not 
within  the  general  knowledge  of  everyone,  and  which  may  be  subject 
to  more  or  less  uncertainty,  or  more  or  less  under  the  influence  or 
control  of  one  or  other  of  the  parties  to  the  instrument.  The  pro- 
vision for  the  payment  of  the  current  rate  of  exchange  between  the 
place  of  payment  and  some  other  place  is  not  within  the  reason  of 
this  rule,  or  subject  to  the  evils  or  inconveniences  which  it  was 
designed  to  prevent.  While  the  rate  of  exchange  is  not  always  the 
same,  and  while  it  "is  technically  true  that  resort  must  be  had  to 
extrinsic  evidence  to  ascertain  what  it  is,  yet  the  current  rate  of 
exchange  between  two  places  at  a  particular  date  is  a  matter  of  com- 
mon commercial  knowledge,  or  at  least  easily  ascertainable  by  any 
one,  so  that  the  parties  can  always,  without  difficulty,  ascertain  the 
exact  amount  necessary  to  discharge  the  paper.  It  seems  to  us  that 
within  the  spirit  of  the  rule  requiring  precision  in  the  amount  to  be 
paid  a  provision  for  the  payment  of  the  current  rate  of  exchange  in 
addition  to  the  principle  amount  named  does  not  introduce  such  an 
element  of  uncertainty  as  deprives  the  instrument  of  the  essential 
qualities  of  a  promissory  note.  A  provision  for  the  payment  of 
exchange  is  very  different  from  one  for  the  payment  of  reasonable 
attorneys'  fees  in  case  of  suit,  as  in  Jones  v.  Radatz  (27  Minn.  240, 
6  N.  W.  Rep.  800).  The  latter  introduces  an  element  of  uncertainty 
very  different  both  in  kind  and  degree  from  that  introduced  by  the 
former.  Not  only  is  the  amount  of  the  attorneys'  fees  incapable  of 
either  easy  or  definite  ascertainment,  but  the  amount  of  it  is  more 
or  less  under  the  control  of  the  holder  of  the  instrument.  More- 
over, such  a  provision  has  never  been  considered  in  business  circles 
as  properly  ancillary  or  incidental  to  commercial  paper,  or  any  part 
of  its  legitimate  "  luggage." 

2.  The  law  merchant,  including  the  law  of  negotiable  paper,  is 
founded  upon,  and  is  the  creature  of,  commercial  usage  and  custom. 
Custom  and  usage  have  really  made  the  law,  and  courts,  in  their  decis- 
ions, merely  declare  it.  The  law  of  negotiable  paper  is  not  only  founded 
on  commercial  usage,  but  is  designed  to  be  in  aid  of  trade  and  com- 
merce. Its  rules  should,  therefore,  be  construed  with  reference  to 
and  in  harmony  with  general  business  usages,  and,  as  far  as  possible, 
with  the  common  understanding  in  commercial  circles.     This  was  the 


II.  4-]  MUST   BE   TO    PAY   A   SUM    CERTAIN.  21$ 

very  purpose  of  the  statute  of  Anne  placing  promissory  notes  on  the 
same  footing  as  bills  of  exchange,  and  thus  setting  at  rest  a  question 
upon  which  there  had  been  some  difference  of  opinion  in  the  courts. 
Now,  we  think  we  are  safe  in  saying,  and  justified  in  taking  notice 
of  the  fact,  that  if  bankers  or  other  business  men  accustomed  to 
dealing  in  commercial  paper  were  asked  whether  such  an  instrument 
is  a  promissory  note,  and  whether  they  would  deal  with  it  as  negoti- 
able paper,  the  answers  would,  in  almost  every  instance,  be  unhesitat- 
ingly in  the  affirmative.  We  have  no  doubt  but  that  this  is  the  way  in 
which  such  paper  is  generally  looked  upon  and  treated  in  commercial 
and  other  business  circles;  and,  if  so,  the  courts  should,  as  far  as 
possible,  make  their  decisions  to  conform  to  this  general  custom 
and  understanding.  We  recognize  the  importance  of  simplicity  and 
certainty  in  the  terms  and  conditions  of  commercial  paper;  and 
appreciate  the  objections  to  permitting  it  to  be  loaded  down  with 
unnecessary  "luggage,"  but  we  cannot  see,  under  all  the  circum- 
stances, and  especially  in  view  of  what  we  believe  to  be  the  commercial 
usage,  that  any  practical  evil  will  result  from  permitting  the  addi- 
tion of  such  a  provision  for  the  payment  of  current  exchange  on  the 
principal  amount.  Nor  are  we  disposed,  as  a  rule,  to  extend  the 
quality  of  negotiable  paper  to  contracts  for  the  payment  of  money 
beyond  the  strict  limits  of  the  already  established  rules  of  law;  but 
to  exclude  from  that  category  paper  like  that  under  consideration 
would  be  to  exclude  the  very  class  of  paper  which  ought  to  be  held 
negotiable,  if  any  promissory  notes  ought  to  be  so  held,  —  paper 
given  and  taken  in  commercial  transactions,  properly  so  called;  for 
rarely,  if  ever,  would  a  provision  for  exchange  be  incorporated  in 

any  other. 

Order  reversed. 

Application  for  re-argument  denied  July  20,  1S93. 


(/)  Engagement  to  pay  costs  of  collection  or  attorney  s  fees. 

§  21         STAPLETON  v.  LOUISVILLE  BANKING  CO.        [§  2] 

95  Georgia,  S02. —  1S95. 

Simmons,  C.  J.  — The  controlling  question  in  this  case  is,  whether 
a  promissory  note  is  rendered  non-negotiable  by  a  stipulation  to  pay 
"  all  costs  and  ten  !)er  cent,  on  amount  for  counsel  fees,  if  placed 
in  the  hands  of  an  attorney  for  suit."  There  is  no  prior  decision 
of  the  court  upon  the  question,  and  the  decisions  of  other  courts  as 


2l6  FORM    REQUIRED.  [ART.  II. 

to  the  effect  of  such  stipulations  are  conflicting.  We  think  the  better 
view,  and  the  one  supported  by  the  weight  of  authority,  is  that  such 
a  stipulation  does  not  impair  the  negotiable  character  of  the  paper. 
Our  code  defines  a  promissory  note  to  be  "a  written  promise  made 
by  one  or  more  to  pay  to  another,  or  order,  or  bearer,  at  a  specified 
time,  a  specific  amount  of  money,  or  other  articles  of  value."  (§  2774.) 
It  is  defined  by  Story  to  be  "  a  written  promise  by  one  person  to  pay 
to  another  person  therein  named,  or  order,  a  fixed  sum  of  money,  at 
all  events  and  at  a  specified  time,  or  at  a  time  which  must  certainly 
arrive."  [Story,  Prom.  Notes,  p.  2).  The  note  in  question  con- 
forms to  all  these  requirements.  It  is  certain  as  to  the  payee, 
as  to  the  time  of  payment,  and  as  to  the  amount.  The  stipula- 
tion as  to  costs  and  attorney's  fees  is  not  a  part  of  the  main  engage- 
ment, Init  relates  to  the  remedy  in  case  of  failure  to  comply 
with  the  contract,  and  is  intended  to  compensate  for  the  expense 
resulting  from  its  breach.  It  does  not  become  effective  unless 
there  is  a  failure  to  pay  at  the  time  specified;  and  it  cannot  then 
affect  Its  negotiability,  for  negotiability  in  the  full  commercial 
sense  ceases  at  maturity.  As  has  been  well  said  by  Mr.  Daniel 
in  his  work  on  Neg.  Instruments  (vol.  i,  §  (>2a,  4th  ed.),  "  it 
seems  paradoxical  to  hold  that  instruments  evidently  framed  as 
bills  and  notes  are  not  negotiable  during  their  currency,  because 
when  they  cease  to  be  current  they  contain  a  stipulation  to  defray 
the  expenses  of  collection."  So  far  from  tending  to  check  the  cir- 
culation of  the  paper,  such  a  provision  adds  to  its  value  and  thus 
renders  it  more  available  for  commercial  purposes.  In  support  of 
these  views,  see  the  following  authorities:  (i  Daniel,  Neg.  Inst., 
4th  ed.  §  62  et  seq.j  i  Randolph,  Com.  Paper,  §§  205,  206;  Parsons, 
Bills  and  Notes,  146,  147;  Tiedeinan,  Com.  Pap.,  §  2%b;  2  Am.  6^ 
£ng.  Enc.  of  Law,  324;  Montgome?y  v.  CrossiJnvait,  90  Ala.  553,  24 
Am.  State  Rep.  832,  and  cases  cited;  Farmers'  Nat.  Bank  v.  Sutton 
Mfg.  Co.,  6  U.  S.  Appeals,  312,  331;  Shenandoah  Nat.  Bank  v. 
Marsh  (Iowa),  56  N.  W.  Rep.  458;  Second  Nat.  Bank  v.  Anglin,  33 
Pac.  Rep.  1056,  6  Wash.  403;  Dorsey  v.  Wolff,  32  N.  E.  Rep.  495, 
affirming  38  111.  App.  305;  Stoneman  v.  Pyle,  35  Ind.  103,  9  Am.  Rep. 
637;  Proctor  V.  Baldwin,  82  Ind.  370;  Gaar  \ .  Louisville  B kg.  Co., 
II  Bush  (Ky.),  180;  Seaton  v.  Scovill,  18  Kans.  433;  Nickerson  v. 
Sheldon,  t^t^  m-  373'  ^5  Am.  Dec.  280;  Dietrich  v.  Bayhi,  23  La.  Ann. 
767;  Trader  v.  Chidester,  41  Ark.  242,  48  Am.  Rep.  38;  Farmers^ 
Nat.  Bank  v.  Rasmussen,  i  Dak.  60;  ILeard  \.  Dubuque  Bank,  8  Neb. 
10;  30  Am.  Rep.  811;  JLoiuenstein  v.  Barnes,  5  Dillon,  482;  Bank  of 
Commerce  v.  Fuqua.  11  Montana,  285.  See  also  Towne  \  Rice,  122 
Mass.   67;  Arnold  v.  Rock  River  Valley  R.  Co.,  5    Duer,  207;  Adams 


II.  4.]  MUST   BE   TO    PAY   A   SUM   CERTAIN.  21/ 

V.  Addington,  i6  Fed.  Rep.  09;  HiigJiitt  v.  Johnson,  28  Fed.  Rep.  865; 
16  Am.  Law  Rev.  853).' 

It  was  complained  that  the  court  erred  in  directing  the  jury  to  find 
in  favor  of  the  plaintiff  the  amount  of  attorney's  fees  stipulated  in 
the  note,  in  addition  to  the  principal  and  interest,  the  objection 
being  that  there  was  no  evidence  to  show  that  the  note  had  ever 
been  placed  in  an  attorney's  hands  for  collection.  We  think  the 
fact  that  the  plaintiff  was  represented  in  this  action  by  an  attorney 
was  sufficient,  without  further  evidence,  to  authorize  the  court  to  so 
instruct  the  jury.    (See  No.  Atchison  Bank  v.  Gay,  21  S.  W.  Rep.  479.) 

Judgment  affirmed. 


§21  MAYNARD  v.  MIER.  [§  2] 

S5  Indiana,  317. — 18S2. 

Woods,  C.  J.  — Appeal  from  a  judgment  on  a  promissory  note,  a 
copy  of  which  was  filed  with  the  complaint.  It  contains  a  promise 
in  the  ordinary  form,  to  pay  a  sum  named,  "  with  interest  at  the 
rate  of  ten  per  cent,  after  maturity,  and  ten  per  cent,  attorney's 
fees." 

It  is  claimed  that  the  court  erred  in  overruling  the  defendants' 
demurrer  to  the  complaint.  The  entire  argument  on  the  point  is  in 
these  words:  "  The  complaint  is  not  sufficient  in  this,  it  is  not 
definite  and  certain,  and  the  copy  of  the  note  shows  that  the  agree- 
ment (is)  to  pay  ten  per  cent,  attorney's  fees,  which  we  insist  is 
void,  and  that,  therefore,  the  note  is  usurious  as  to  that  amount,  and 
should  be  held  void,  and  the  judgment  reversed." 

If  the  stipulation  for  attorney's  fees  were  conceded  to  be  void 
the  validity  of  the  note  would  not  be  otherwise  affected,  and  conse- 
quently the  demurrer  was  properly  overruled. 

Judgment  affirmed,  with  costs.'' 

'Contra.  First  Nat.  Bk.  v.  Babcock,  94  Cal.  96;  Maryland  Fertilizing  Co.  v. 
Newman,  60  Md.  584;  Altman  v.  Rittershofer,  68  Mich.,  287;  Jones  v.  Radatz,  27 
Minn.  240;  McCoy  v.  Green,  83  Mo.  626;  Decorali  First  Nat.  Bk.  v.  Laugklin,  4 
N.  Dak.  391;  JVoods  v.  North,  84  Pa.  St.  407;  Stillwater  First  Nat.  Bk.  v. 
Larsen,  60  Wis.  206.  —  Ed. 

*  There  are  three  views  as  to  the  validity  of  the  stipulation  as  to  attorney's 
fees;  (i)  The  stipulation  is  valid.  Bo-cuie  v.  I/all,  69  Md.  433;  Dorsey  v.  Wolff, 
142  111.  589.  (2)  The  stipulation  is  void.  Bullock  v.  Taylor,  39  Mich.  137;  Rixey 
V.  Pcarre,  89  Va.  1 13;  Security  Co.  v.  Eyer,  36  Neb.  507;  IVitherspoon  v.  Mussel- 
man,  14  Bush  (Ky.),  214.  (3)  The  stipulation  to  pay  such  fees  as  the  court 
adjudges  reasonable,  is  valid,  but  a  stipulation  for  a  specific  sum  is  void. 
Levens  v.  Briggs,  21  Ore.  333.     Most  courts  hold  that  the  amount  stipulated  is 


2l8  FORM    REQUIRED.  [ART.  II. 

5.    Must  be  Payable  in  Money;  But  Particular  Kind  May  be 

Designated. 

(a)  Payment  j?iiist  be  i?i  money. 

§  20         FIRST  NATIONAL  BANK  OF  BROOKLYN  v.       [§  l] 

SLETTE. 

69  Northwestern  Reporter  (Mich.),  1148-— 1897. 

Action  on  an  instrument  set  out  in  the  opinion.  Verdict  for 
plaintiff.     From  an  order  denying  a  new  trial,  defendants  appeal. 

Start,  C.  J.  — This  action  is  based  upon  an  obligation,  which  is 
substantially  in  these  words: 
$1  673.  Halstad,  Minn.,////)'  26,  1S94. 

For  value  received,  we  promise  to  pay  to  the  order  of  the  John  Good  Cordage 
and  Machine  Company  the  sum  of  sixteen  hundred  and  seventy-three  dollars, 
as  follows:  Payable  by  New  York  or  Chicago  exchange,  $560,  Nov.  15th,  1894; 
$560,  Dec.  ist,  1894;  $560,  Dec.  15th,  1S94.  Without  interest,  if  paid  as  due;  if 
not,  then  legal  rate  from  date  until  paid. 

The  only  question  on  this  appeal  is  whether  this  is  a  negotiable 
instrument  under  the  law  merchant.  It  is  absolutely  essential,  in 
order  to  constitute  a  promissory  note  under  the  law  merchant,  that 
the  promise  be  to  pay  in  money.  If  this  instrument  can  be  con- 
strued as  an  absolute  promise  to  pay  in  money  $1,673,  with  exchange, 
it  is  negotiable;  otherwise,  not.  {Hastings  v.  Thompson,  54  Minn. 
184,  55  N.  W.  968.)  The  case  of  Bradley  v.  Lill  (4  Biss.  473,  Fed. 
Cas.  No.  1,783),  is  the  only  one  to  which  our  attention  has  been 
called,  where  the  language  of  the  instrument  was  similar  to  the  one 
under  consideration.  In  the  case  referred  to  the  note  was  made 
in  Chicago,  and  was  payable  at  New  York,  "  in  "  exchange;  and  it 

not  conclusive,  but  that  there  must  be  proof  cf  the  actual  value  of  the  services. 
First  Nat.  Bank  v.  Larsen,  60  Wis.  206;   Goss  v.  Bo-weii,  104  Ind.  207. 

There  are  four  distinct  holdings  as  to  the  result  upon  the  negotiability  of  a  bill 
or  note  of  the  insertion  of  a  stipulation  as  to  payment  of  attorney's  fees:  (i)  The 
stipulation  is  valid  and  enforceable,  and  does  not  affect  the  negotiability  of  the 
instrument.  Dorsey  v.  Wolff,  142  111.  589.  (2)  The  stipulation  is  valid  and 
enforceable,  but  it  destroys  the  negotiability  of  the  instrument.  Jones  v.  Radatz, 
27  Minn.  240;  Johnston  Harvester  Co.  v.  Clark,  30  Minn.  308;  First  Nat.  Bk.  v, 
Larsen,  60  Wis.  206.  (3)  The  stipulation  is  void,  and  as  it  may  therefore  be  dis- 
regarded, it  does  not  affect  the  negotiability  of  the  instrument.  Gilmore  v. 
Hirst,  56  Kans.  626;  Chandler  v.  Kennedy  (S.  D.).  65  N.  W.  R.  439.  (4)  The 
stipulation  is  void,  but  nevertheless  it  destroys  the  negotiability  of  the  instru- 
ment. Bullock  V.  Taylor,  39  Mich.  137;  Altman  v.  Rittershofer,  68  Mich.  287; 
Tinsley  v.  Hoskins,  ill  N.  C.  340;  Netv  Windsor  First  Nat.  Bk.  v.  Bynum,  84 
N.  C.  24.     It  is  difficult  to  support  this  view  upon  principle.  —  Ed. 


II.   5-]  MUST   BE   TO    PAY    MONEY.  219 

was  held  that  the  note  was  negotiable,  upon  the  ground  that  the 
promise  was  to  pay  the  sum  named  in  the  note,  "  with  "  exchange, 
which  was  a  mere  incident  to  the  debt.  In  the  case  at  bar  the  note 
is  not  payable  at  any  particular  place,  and  the  promise  is,  not  to  pay 
a  given  number  of  dollars  in  money  "  with  "  —  that  is,  plus  —  the 
current  rate  of  exchange,  but  it  is  to  pay  the  sum  named  in  the  note 
by  New  York  or  Chicago  exchange.  The  holder  of  this  instrument 
cannot  demand  in  payment  thereof  $1,673  in  money,  plus  the  cost 
of  exchange;  for  the  maker  is  not  bound  to  discharge  his  obligation 
except  by  means  of  inland  bills  on  New  York  or  Chicago.  Nor  can 
the  maker  tender  in  payment  $1,673  ^^  money,  with  the  cost  of 
exchange;  for  his  promise  is  to  make  payment  by  inland  bills,  which 
he  must  purchase  in  the  market.  The  instrument,  then,  is  not  pay- 
able in  money,  and  is,  therefore,  not  a  promissory  note,  within  the 
law  merchant.  {^Easton  v.  Hyde,  13  Minn.  90  (Gil.  83);  Jones  v. 
Fales,  4  Mass.  245;  Irvine  v.  Lowry,  14  Pet.  293;  i  Daniel,  Neg.  Inst., 
§§  55»  5^5  Tied.  Com.  Paper,  §  29;  i  Rand.  Com.  Paper,  §  90). 
In  reaching  this  conclusion  we  have  not  been  unmindful  of  the  fact 
that,  in  commercial  usage,  bills  of  exchange  are  regarded  as  substi- 
tutes for  money;  but  this  usage  cannot  make  them  such.  Order 
reversed,  and  a  new  trial  granted.' 


{ly)    What  constitutes  cur  re  tit  money.^ 

§  25  LAIRD  V.  STATE.  [§  6] 

61  Maryland,  309. —  1883. 
Robinson,  J.,  delivered  the  opinion  of  the  Court. 
The  plaintiff  in  error  was  indicted  for  forging  and  uttering  a  bill 
of  exchange,  which  is  set  out  in  the  indictment  as  follows: 

Staunton,  Va.,  September  4,  1882. 
Augusta  National  Bank,  pay  to  J.  Edwin  Laird  or  bearer,  the  sum  of  seventy- 
five  dollars  ($75)  current  funds.  G.  G.  Gooch. 
Correct,  W.  P.  Tarns,  Cashier. 
[And  endorsed'\  J.  Edwin  Laird. 

'  "A  B  has  deposited  in  this  bank  $2,180  in  cks.,  payable  to  the  order  of  him- 
self, on  the  return  of  this  certificate  properly  indorsed,"  is  not  negotiable 
because  it  does  not  appear  that  the  bank  promises  to  pay  in  money. — First 
National  Bank  of  Farmersville  v.  Greenville  N'atioiial  Bank,  84  Te.x.  40.  An 
order"  to  pay  rents  as  they  become  due"  is  not  a  bill  of  exchange  because 
(1)  it  is  payable  out  of  a  particular  fund,  and  (2)  it  is  not  payable  in  money  on 
its  face.  "  It  is  to  pay  rents,  which  may  be  due  in  wheat,  fowls,  or  services, 
as  well  as  money."  — Morton  v.  N'avlor,  i  Hill  (N.  Y.),  583  (1841).  —  Ed. 

"See  Neg.  Inst.  L.,  §  25  [6],  subsect.  5.  —  Ed. 


220 


FORM    REQUIRED.  [ART.  II. 


A  de}?iurrer  was  filed  to  the  indictment,  which  was  overruled,  and 
the  prisoner  was  tried  before  the  court  and  found  guilty. 

Motions  for  new  trial,  and  to  quash  the  indictment  were  made,  and 
both  overruled,  and  the  prisoner  was  sentenced  to  the  penitentiary 
for  five  years.  The  record  comes  before  us  on  petition  setting 
forth  the  points  and  questions,  by  the  decision  of  which  the  plaintiff 
in  error  feels  aggrieved. 

In  reo-ard  to  the  first  assignment  of  error,  that  there  is  a  variance 
between  the  presentment  and  indictment,  it  is  only  necessary  to 
say,  that  when  one  is  tried  upon  an  indictment,  we  must  look  to  it 
and  not  to  the  presentment  to  ascertain  the  nature  and  character  of 
the  offense  charged.  By  the  finding  of  the  indictment,  the  grand 
jury  has  the  right  to  correct,  change,  or  modify  the  presentment. 

In  the  next  place  it  is  argued,  that  the  paper  writing  set  forth  in 
the  indictment,  is  not  a  bill  of  exchange  because  it  is  payable  "  in 
current  funds."  Bills  of  exchange  pass  by  delivery  or  endorsement, 
and  it  is  essential  that  the  instrument  purporting  to  be  one,  should 
be  payable  in  money.  A  direction  to  pay  out  of  certain  funds,  or 
notes  of  a  particular  bank,  or  the  currency  of  a  particular  place  or  state, 
have  been  held  to  destroy  its  negotiability,  because  the  medium  of 
payment  is  fluctuating  and  uncertain.  The  many  and  conflicting 
decisions  on  this  subject,  will  be  found  collected  in  i  Daniel  on  Neg. 
Inst.,  sees,  di-j,  and  note.  All  the  cases,  however,  agree,  if  the  instru- 
ment be  payable  in  current  money,  it  is  sufificient,  because  legal 
tender  money  will  be  presumed  to  be  intended.  The  words  "  cur- 
rent funds,"  as  used  in  the  paper  before  us,  mean  nothing  more  or 
less  than  "current  money,"  and  so  construed  the  instrument  was 
negotiable. 

Again  it  is  said  the  paper  ought  to  have  been  described  as  a  c/ieck 

or  an  order  for  the  payment  of  money.     Since  the  decision  in  Hawthorn 

V.  State  (56   Md.  530),  this   is    no   longer  an   open   question   in  this 

state.      The  subject  was  fully  considered  in  that  case  and  it  was 

held   that  a  check  drawn  on  a  bank  is  a  bill  of  exchange,  and  the 

forgery  of  the  indorsement  thereon  was  a  felony  punishable  under 

the  Code.     The  check  set  out  in  the  indictment  was  drawn,  it  is 

true,  in  the  state  of  Virginia,  but  there  is  no  proof  in  the  record  to 

show  the  law  is  different  in  that  state. 

remitting  a  question  as  to  stamping.] 

•-  Judgment  affirmed. 


II.   5-  MUST    BE   TO    PAY    MONEY.  221 

§  25     Mr.  Justice  Field  in  BULL  v.  BANK  OF  KASSON.      [§  6] 

123  United  States,  105,  112. —  18S7. 

The  certificate  of  division  of  opinion  presents  to  us  only  one  ques- 
tion, and  yet,  to  answer  that  correctly,  we  must  consider  whether 
the  negotiability  of  the  instruments  in  suit  was  affected  by  the  fact 
that  they  were  payable  "  in  current  funds."  Undoubtedly  it  is  the 
law  that,  to  be  negotiable,  a  bill,  promissory  note  or  check,  must 
be  payable  in  money,  or  whatever  is  current  as  such  by  the  law  of 
the  country  where  the  instrument  is  drawn  or  payable.  There  are 
numerous  cases  where  a  designation  of  the  payment  of  such  instru- 
ments in  notes  of  particular  banks  or  associations,  or  in  paper  not  cur- 
rent as  money,  has  been  held  to  destroy  their  negotiability.  (^Irvine 
V.  Lcnary,  14  Pet.  293;  Miller  v.  Austen^  13  How.  218,  228).  But 
within  a  few  years,  commencing  with  the  first  issue  in  this  country 
of  notes  declared  to  have  the  quality  of  legal  tender,  it  has  been  a 
common  practice  of  drawers  of  bills  of  exchange  or  checks,  or 
makers  of  promissory  notes,  to  indicate  whether  the  same  are  to  be 
paid  in  gold  or  silver,  or  in  such  notes;  and  the  term  "current 
funds  "  has  been  used  to  designate  any  of  these,  all  being  current 
and  declared,  by  positive  enactment,  to  be  legal  tender.  It  was 
intended  to  cover  whatever  was  receivable  and  current  by  law  as 
money,  whether  in  the  form  of  notes  or  coin.  Thus  construed,  we 
do  not  think  the  negotiability  of  the  paper  in  question  was  impaired 
by  the  insertion  of  these  words.' 

'Current  Funds. —  In  the  following  cases  "  current  funds  "  was  held  the 
equivalent  of  "  money:  "  Lacy  v.  Holbrook,  4  Ala.  88;  Phcenix  Ins.  Co.  v. 
Allen,  II  Mich.  501;  s.  C,  13  Mich.  191;  White  v.  Richmond,  16  Oh.  6; 
Citize7is'  Nat.  Bk.  v.  Brown,  45  Oh.  St.  39;  Telford  v.  Patton,  144  111.  611.  In 
the  following  cases  "  current  funds  "  was  held  not  the  equivalent  of  "  money:  " 
Lafayette  Bank  v.  Ringel,  51  Ind.  393;  Johnson  v.  Henderson,  76  N.  Car.  227; 
Wright  V.  Hart,  44  Pa.  St.  454;  7\'xas  Land,  etc.,  Co.  v.  Carroll,  63  Tex.  48; 
Piatt  V.  Sank  Co.  Bank,  ij  Wis.  230. 

Currency.  In  the  following  cases  "  currency  "  was  held  the  equivalent  of 
money:  Swift  v.  Whitney,  20  111.  144;  Phelps  v.  Town,  14  Mich.  374;  Mitchell 
V.  Hcivitt,  13  Miss.  361;  Dugan  v.  Campbell,  i  Oh.  115;  Howe  v.Hartness,  11  Oh. 
St.  449;  Butler  v.  Paine,  8  Minn.  324;  Frank  v.  Wessels,  64  N.  Y.  155  ("  paper 
currency,"  when  there  is  a  legal  tender  paper  currency);  Hlauber  v.  Bigger  staff, 
47  Wis.  551;  Wright  w  Morgan  (Tex.),  37  S.  W.  627.  In  the  following  cases 
"currency"  was  held  not  the  equivalent  of  "money:"  Mobile  Bank  v. 
Brown,  42  Ala.  108;  Dillard  v.  Evans,  4  Ark.  175;  Rindskoff  v.  Barrett,  11 
Iowa,  172;  Hiise  v.  Ilamblin,  29  Iowa,  501;  Chambers  v.  George,  5  Litt.  (Ky.) 
335;  (otherwise  of  "  Kentucky  currency,"  Latnpton  v.  Haggard,  3  Monr.  (Ky.), 
149);  Fariucll  v.  K'ennctt,  7  Mo.  595;  Hicklin  v.  Tucker,  2  Yerg.  (Tenn.)  448; 
Fordv.  Mitchell,  15  Wis.  334.  —  Ed. 


222  FORM    REQUIRED,  [ART.  II. 

§  25  Miller,   J.,  in  PARDEE  v.  FISH.  [§  6] 

60  New  York,  265.  —  1S75. 

It  is  further  urged  that  the  instrument  in  question  is  not  com- 
mercial paper  for  the  reason  that  it  is  made  payable  in  current  bank 
notes  instead  of  money.     The  authorities  in  this  state,  I  think,  are 
adverse  to  this  position.      In  Keith  v.  Jones  (9  Johns.  120),  the  note 
upon   which   the  action  was  brought  was  declared  to  be  payable  in 
''  York  State  bills  or  specie,"  and  it  was  said  that  it  "  is  the  same 
thing  as  being  made  payable  in  lawful  current  money  of  the  state, 
for  the  bills  mentioned   mean  bank  paper,   which  is  here   in  con- 
formity with  common  usage  and  common  understanding  regarded  as 
cash."     In   Judah  v.   Harris  (19  Johns.    144),    a   promissory  note 
payable  "  in  bank  notes  current  in  the  city  of  New  York,"  was  held 
to  be  a  negotiable  note  within  the  statute.     It  is  said  that  these 
decisions  were  placed   upon  the  ground  that  the  court  could  take 
judicial  notice  that  such  bills  are  equivalent  to  specie.     The  same 
rule  may  well  apply  here,  as  "current  bank  notes  "  are  notes  or  bills 
used  in  general  circulation  as  money,  and  constituted  the  general 
currency  of  the  country  recognized  by  law  at  the  time  and  place 
where  payment  was  to  be  made  and  demanded.     These  notes  which 
were  in   circulation   when    the  certificate   was  given    and   payment 
demanded,  were  almost  entirely  of  one  kind  authorized  by  the  gov- 
ernment as  currency.     They  thus  being  lawful  money  of  the  United 
States,  the  courts  were  bound  to  take  judicial  notice  of  that  fact.   The 
cases  of  Lieber  v.  Goodrich   (5  Cow.  186),  and  Thompson  v.  S/oan  (23 
Wend.  77),  are  not  in  conflict  with  Heath  v.  Jones  and  Judah  v.  Har- 
ris {snpra).     Although  the  doctrine  of  the  latter  was  doubted  in  3 
Kent's  Commentaries,  pp.  75-76,  and  in  some  of  the  state  courts  it 
is  held  that  a  note  payable  in  current  funds  is  not  negotiable,  it  is  safe 
to  follow  the  adjudications  in  this  state  as  settling  the  law  upon  the 
subject.     Even  although  a  demand  was  necessary  upon  the  bank 
before  an  action  could  be  brought  against  it  on  the  instrument,  thus 
distinguishing  the  case  from  that  of  a  promissory  note,  where  the 
maker  may  be  sued  without  any  demand,  I  do  not  think  that  this 
fact  takes  away  the  negotiable   character  of  the   instrument  under 
the  decisions  cited,  and  it  must,  therefore,  be  considered  as  possess- 
ing all  the  features  of  a  negotiable  promissory  note.' 


'  Bank  Notes.  The  following  were  held  quivalent  to  "money:  "  "  The  bank 
notes  current  in  the  city  of  New  York."  Judah  v.  Harris,  19  Johns.  (N.  Y.)  144. 
"  Current   bank   notes."     Pardee  v.  Fish,  supra;  Fleming  v.  Nail,   i    Tex.   246. 


II.  5. J  MUST   BE   TO    PAY    MONEY.  223 

§  25  CHRYSLER  v.  REXOIS.  [§  6] 

43  New  York,  209. —  1S70. 

Action  by  indorsee  on  a  draft  for  1,205  gold  dollars.  Judgment 
for  plaintiff. 

Allen,  J.  —  [After  disposing  of  another  matter].  The  bill  in 
suit  was  drawn  in  Montreal  on  a  business  firm  at  Whitehall  in  this 
state,  payable  in  New  York  in  dollars,  the  money  of  account  of  the 
state,  and  in  gold  dollars,  a  coin  authorized  by  Congress,  and  made 
a  legal  tender  in  the  payment  of  debt.  It  was,  therefore,  negotiable 
as  a  bill  of  exchange,     (i  R.  S.,  61 1,  §  i ;  9  U.  S.  Stat,  at  Large,  397.) 

It  is  enough  that  it  is  for  the  payment  of  money  and  money  only,  in 
cash  and  not  something  that  may  differ  in  value  from  cash.  [Leiber 
V.  Goodrich,  5  Cow.  186.)  It  is  agreed  that  bills  payable  in  mer- 
chandise or  anything  but  money  are  not  good  bills  of  exchange,  but 
the  cases  are  not  agreed  in  all  respects  as  to  what  shall  be  deemed 
money.  In  this  state  it  is  held  that  a  promissory  note,  payable  "  in 
bank  notes  current  in  the  city  of  New  York"  or  "in  New  York 
state  bills  or  specie,"  are  negotiable  notes  within  the  statutes  [Keith 
V.  /ones,  9  Johns.  120;  Judah  v.  Harris,  19  Johns.  144),  while  a  note 
payable  "  in  Canada  money  "  is  not  a  negotiable  note.  {^Thompsen 
V.  Sloan,  23  Wend.  71.)  The  first  cases  were  decided  upon  the 
ground  that  the  court  might  take  judicial  notice  that  bank  notes, 
current  in  the  city  of  New  York,  were  customarily  considered  and 
treated  as  equivalent  to  money,  which  could  not  be  predicated  of  a 
note  payable  in  Canada  money.  Coin  current  in  Canada  might  not 
be  current  in  this  state,  and  foreign  bills  are  not  regarded  as  money. 
[Jones  V.  Fales,  4  Mass.  245.)  In  other  states  a  different  rule  pre- 
vails; and  bills  payable  in  bank  bills,  even  of  the  state  where  paya- 
ble, are  held  not  negotiable.  [McCormick  v.  Trotter,  10  Serg.  &  R. 
94.)  In  this  action  the  bill  is  for  1,205  gold  dollars,  that  is  ^1,205 
in  gold  coin,  and,  as  is  claimed,  in  coin  of  a  particular  denomination; 
but  it  is  nevertheless  payable  in  a  coin  known  and  recognized  as  a 
part  of  the  currency  of  the  country,  coined  by  authority  of  Congress 

"  Current  bank  notes  of  Cincinnati."     Morris  v.  Edwards,  i  Oh.  189;   Sweiland 
V.  Creigh,  15  Oh.  118. 

The  following  were  held  not  equivalent  to  "  money:  "  "Current  bank 
paper."  Campbell  v.  IVeister,  i  Litt.  (Ky.),  30.  "  Notes  receivable  in  bank." 
Breckinridge  v.  Halls,  4  Monr.  (Ky.),  533.  "  Current  notes  of  North  Carolina." 
IVarren  v.  Brown,  64  N.  Car.  381.  "Current  bank  notes."  Gray  v.  Donahoe, 
4  Watts.  (Pa.)  400;  Gamble  v.  Hation,  Peck  (Tenn.)  130;  Kirkpatrick  v. 
McCullough,  3  Humph.  (Tenn.)  171 ;  McDowell  v.  Keller,  4  Coldw.  (Tenn.)  258. 
"Current  bills."     Collins  v.  Lincoln,  li  Vt.  268,  —  Ed. 


224  FORM    REQUIRED.  [ART.  II. 

and  made  receivable  in  all  payments  (9  Stat,  at  Large,  397).  If  the 
bill  had  called  for  $1,205  without  specifying  the  coin  or  currency  it 
would  have  been  payable  in  any  lawful  currency,  and  the  acceptors 
might  have  discharged  their  obligations  by  tendering  payment  in 
"gold  dollars."  The  tender  would  have  been  in  money;  but  if 
"gold  dollars  "  are  but  an  article  of  merchandise,  a  commercial  com- 
modity, as  claimed,  a  tender  of  these  in  satisfaction  of  an  obligation 
for  the  payment  of  money  would  not  be  good,  and  a  debtor  could 
not  by  such  tender  relieve  himself  from  his  obligation.  The  laws 
have  not  been  repealed  which  declare  the  money  value  of  the  gold 
and  silver  coin  of  the  United  States  and  make  them  a  legal  tender 
in  the  payment  of  debts.  The  bill  has  all  the  qualities  of  a  nego- 
tiable bill  of  exchange;  it  is  payable  absolutely,  and  in  money,  and 
not  out  of  a  particular  fund. 

There  are  two  descriptions  of  lawful  money  in  use  under  acts  of 
Congress  (assuming  the  validity  of  the  "  legal  tender"  acts,  so  called, 
as  applicable  to  any  contract  calling  for  money),  and  it  does  not 
destroy  the  negotiability  of  commercial  paper  or  change  its  character, 
that  it  is  in  terms  made  payable  in  any  description  of  money  that 
is  recognized  and  known  as  money  current  in  business,  and  which  is 
made  a  legal  tender  in  payment  of  debts.  {Butler  v.  Horwitz,  7 
Wall.  258;  Bronson  v.  Rodcs,  7  Wall.  229.)  Bills  of  exchange  are 
favored  as  valuable  instruments  in  commerce,  and  merchants  must 
be  permitted  to  make  them  payable  in  any  money  lawful  and  current 
in  the  place  where  payable;  and  if  more  than  one  description  of 
money  is  recognized  by  the  law  of  the  place,  to  select  that  which  is 
most  convenient  to  the  parties,  without  changing  the  character  and 
legal  incidents  of  the  instruments  and  destroying  their  negotiability. 

But  the  referee  has  found,  as  a  question  of  fact,  that  the  contents 
of  the  said  bill  of  exchange  or  draft  were  expressed  in  the  money 
of  account  and  currency  of  the  province  of  Canada,  and  has  awarded 
damages  for  non-payment  upon  that  theory,  that  is,  has  given  judg- 
ment for  the  value  of  the  amount  called  for  in  Canada  coin  in 
Montreal  on  the  day  the  bill  matured.  In  this  the  referee  erred. 
The  contract,  interpreted  by  the  law  of  the  place  where  payable, 
called  for  payment  in  money  there  current  and  the  construction  of 
the  contract  was  one  of  law  and  not  of  fact. 

The  error  of  the  referee  was  earned  into  the  judgment  in  the 
assessment  of  the  damages. 

Upon  this  construction  of  the  contract,  and  an  allegation  in  the 
complaint,  that  the  value  in  New  York  of  a  draft  on  Montreal  for 
$1,205  was  at  the  time  of  the  default  in  payment,  $1,831.60,  not 
denied  by  the  answer,  the  referee  reported  in  favor  of  the  plaintiff 


II.   5-]  MUST    BE   TO    PAY    MONEY,  22$ 

for  that  amount,  with  interest  to  the  date  of  the  report,  and  the 
plaintiff  had  judgment  accordingly.  The  plaintiff  was  entitled  to  a 
judgment  following  the  contract,  and  payable  in  coin  for  the  amount 
to  which  the  law  entitled  him  upon  the  dishonor  of  the  bill.  That 
was  the  sum  specified  in  the  bill,  with  interest  thereon,  at  the  rate 
allowed  by  law. 

There  is  no  warrant  for  an  allowance  of  damages  for  the  non-pay- 
ment of  money  beyond  the  interest  given  by  statute,  neither  can  the 
courts  compel  a  party,  who  has  stipulated  for  the  receipt  of  money 
in  coin,  to  accept  of  an  equivalent  in  depreciated  currency.  So 
long  as  the  inferior  currency,  which  is  excluded  from  the  operation 
of  the  contract,  and  cannot  be  paid,  or  tendered  in  satisfaction, 
fluctuates  in  value,  absolute  justice  cannot  be  done  to  the  parties  by 
adjudging  payment  in  the  depreciated  currency  of  a  debt  due  in 
coin,  with  an  addition  for  the  difference  in  value. 

The  only  way  in  which  effect  can  be  given  to  the  contract,  is  by  a 
judgment  in  terms  payable  in  the  better  currency  to  which  the 
creditor  is  entitled,  and  an  execution  following  the  judgment,  and  so 
long  as  the  law  recognizes  the  two  currencies  of  different  values, 
judgments  upon  contracts  for  the  payment  in  the  better  currency, 
must  of  necessity,  be  given  in  this  form,  or  the  distinction  between 
the  two  kinds  of  money  as  affecting  the  rights  of  parties,  vanishes 
when  the  contract  is  merged  in  the  judgment,  and  the  rights  of  a 
creditor  under  a  contract  for  payment  in  coin  are  of  no  value.  This 
form  of  judgment  is  sanctioned  by  precedent,  and  has  the  warrant  of 
the  Supreme  Court  of  the  United  States.  {Bronsou  v.  Rodes,  7  Wall. 
229;   Cheanykee  \ .   United  States^  3  Id.  320.) 

The  judgment  must  be  modified,  and  reduced  to  the  amount  to 
which  the  plaintiff  was  entitled,  payable  in  coin,  with  costs  of  the 
court  below,  payable  in  currency,  without  costs  to  either  party  upon 
the  appeal. 

All  the  judges  concurring,  judgment  modified  in  accordance  with 
the  opinion  of  Allen,  J. 


HOGUE  V.  WILLIAMSON. 

85  Texas,  553-— 1893. 

Gaines,  Associa.te  Justice.  — This  is  a  question  certified  to  us 
for  determination  by  the  Court  of  Civil  Appeals  for  the  Third 
Supreme  Judicial   District.     The  certificate  is  as  follows: 

"The  plaintiff,  Hogue,  brought  suit  against  defendant,  William- 
son, upon  a  written  obligation,  which  reads  as  follows: 

NEGOT.   INSTRUMENTS  —  I5 


226  FORM    REQUIRED.  [ART.  II. 

Saltillo,  ya««a;-j  25,  188S. 
On  or  before  May  i,  1SS8,  I  promise  to  pay  C.  C.  Hogue,  or  order,  one  thou- 
sand Mexican  silver  dollars. 
$1,000,  Mex.  Geo.  S.  Williamson. 

The  petition  alleges  that  on  May  i,  1888,  ^^lexican  dollars  were 
each  worth  85  cents  in  'American'  coin,  and  plaintiff  asks  judgment 
for  $850.  He  states  in  his  petition  that  the  note  is  payable  in  Mexi- 
can silver  dollars. 

The  defendant  filed  a  general  denial,  and  also  averred  in  his 
answer,  under  oath,  that  the  note  sued  on  was  given  for  money 
which  the  plaintiff  had  won  from  defendant  in  a  game  with  cards, 
and  was  therefore  illegal  and  void. 

Upon  the  trial  in  the  court  below,  the  plaintiff  put  in  evidence  the 
written  obligation  sued  on,  and  proved  that  on  May  i,  1888,  Mexican 
silver  dollars  were  worth  80  cents  each.  The  plaintiff  then  rested 
and  the  defendant  introduced  no  testimony. 

The  court  instructed  the  jury  to  return  a  verdict  for  defendant, 
which  was  done,  and  judgment  entered  accordingly. 

If  the  instrument  sued  on  was  a  promissory  note,  this  is  in  error. 
{^Newton  v.  Newton^  77  Texas,  511.) 

With  this  explanation,  the  Court  of  Civil  Appeals  for  the  Third 
Supreme  Judicial  District  certifies  and  submits  to  the  Supreme  Court, 
for  decision  as  a  part  of  the  law  of  this  case,  as  a  new  or  novel 
question,  the  following  proposition: 

Was  the  burden  of  proof  on  the  plaintiff,  after  the  introduction  of 
the  instrument  sued  on,  to  show  non-performance  of  its  obligations 
by  defendant?  In  other  words,  is  the  written  obligation  sued  on  a 
promissory  note,  obligating  its  maker  to  pay  a  certain  sum  of  money; 
or  is  it  an  ordinary  contract  for  the  delivery  of  a  certain  commodity; 
and  must  the  plaintiff,  by  affirmative  testimony,  show  a  breach  of 
the  contract  ?  " 

We  are  of  the  opinion  that  the  instrument  in  question  is  a  promis- 
sory note.  It  is  such  in  form  and  substance,  unless  the  fact  that  the 
sum  payable  is  expressed  in  Mexican  silver  dollars  should  make  a 
difference.  Speaking  of  the  sum  for  which  a  bill  of  exchange  must 
be  drawn,  Mr.  Chitty  says:  "  It  may  be  the  money  of  any  country." 
(Chitty  on  Bills,  160).  Judge  Story  says:  "  But  provided  the  note 
be  for  the  payment  of  money  only,  it  is  wholly  immaterial  in  the  cur- 
rency or  money  of  what  country  it  may  be  payable.  It  may  be  payable 
in  the  money  or  currency  of  England,  or  France,  or  Spain,  or  Hol- 
land, or  Italy,  or  any  other  country.  It  may  be  payable  in  coins, 
such  as  in  pounds  sterling,  livres,  tomnosis,  francs,  florins,  etc.,  for 
in  all  these  and  the  like  cases  the  sum  of  money  to  be  paid  is 
fixed  by  the  par  of  exchange,  or  the  known  denomination  of  the 
currency  with  reference  to  the  par."  (^Story  on  Prom.  Notes,  §  17.) 
The  same  rule  is  distinctly  laid  down  in  i  Daniel  on  Neg.  Inst.,  §  58, 
and  in   Tiedeman  on  Com.  Paper,  §  2gb.     In  view  of  the  opinion  of 


II.  5-]  MUST   BE   TO    PAY    MONEY.  22/ 

these  eminent  text-writers,  it  is  remarkable  that  we  have  found  but 
two  cases  in  which  the  question  is  discussed  or  decided. 

In  Black  V.  Ward  (27  Mich.  191),  it  is  held,  that  a  note  made  in 
Michigan,  payable  in  Canada  in  "Canada  currency,"  is  payable  in 
money,  and  is  therefore  negotiable.  But  in  Thojnpson  v.  Sloan  (23 
Wendell,  71),  a  note  made  in  New  York  and  payable  there  in  "Canada 
currency  "  was  held  not  negotiable.  The  court,  however,  say: 
"This  view  of  the  case  is  not  incompatible  with  a  bill  or  note  payable 
in  money  of  a  foreign  denomination,  or  any  other  denomination, 
being  negotiable,  for  it  can  be  paid  in  our  own  coin  of  equivalent 
value,  to  which  it  is  always  reduced  by  a  recovery.  A  note  payable 
in  pounds,  shillings,  and  pence,  made  in  any  country,  is  but  another 
mode  of  expressing  the  amount  in  dollars  and  cents,  and  is  so  under- 
stood judicially.  The  course  therefore  in  an  action  on  such  in- 
strument is  to  aver  and  prove  the  value  of  the  sum  expressed  in  our 
own  tenderable  coin." 

This  decision  was  made  in  1840,  and  it  is  to  be  inferred  that  at 
that  time  the  dollar  was  not  a  denomination  of  the  lawful  money  of 
Canada.  We  also  infer,  that  when  the  Michigan  case  arose,  this  had 
been  changed  and  the  denomination  of  Canada  money  corresponded 
with  that  of  the  United  States.  Upon  this  theory,  it  would  seem 
that  the  cases  may  be  reconciled.  The  language  quoted  from  the 
opinion  in  Thompson  v.  Sloan,  supra,  indicates  clearly,  that  if  the 
money  named  in  the  note  had  been  a  denomination  of  Canada 
money,  the  ruling  would  have  been  different,  unless,  perchance,  the 
word  "  currency  "  would  have  affected  the  question.  The  note  we 
have  under  consideration  is  for  Mexican  silver  dollars  —  coins 
recognized  by  the  laws  of  the  United  States  as  money  of  the  Republic 
of  Mexico.     (U.  S.  Rev.  Stats.,  §  3567.) 

We  conclude  that  the  note  sued  upon  in  this  case  was  a  negotiable 
promissory  note,  and  that  when  the  plaintiff  offered  it  in  evidence, 
and  proved  the  value  of  the  Mexican  dollar  at  the  time  of  its 
maturity,  he  had  made  a  prima  facte  case,  and  our  opinion  will  be 
certified  accordingly.' 

'A  note  payable  in  New  Brunswick  in  "  U.  S.  currency  "  is  negotiable.  "  It 
is  not  necessary  that  the  money  payable  by  a  note  should  be  current  in  the 
place  of  payment  or  where  the  bill  is  drawn;  it  may  be  in  the  money  of  any 
country  whatever.  *  *  *  And  may  it  not  be  assumed  that  '  United  States 
currency  '  means  the  money  of  the  United  States,  and  that  the  note  is  for  the 
payment  of  three  hundred  and  seventy-one  dollars  of  the  United  States. 
[Citing  statute  recognizing  United  States  coinage.]  This  is  a  legislative  recog- 
nition that  the  engle  of  the  United  States  and  the  divisions  thereof  are  coins; 
or,  in  other  words,  the  currency  of  that  country." — St.  Stephen  Branch  Ry.  Co. 
V.  Black,  2  Hannay  (N.  B.),  139  (1S70).  —  Ed. 


228  FORM    REQUIRED.  [ART.  II. 

6.  Must  not  Contain  an  Order  or  Promise  to  do  Any  Act  in 
Addition  to  Payment  of  Money. 

(a)  Effect  of  additional  stipulations. 

§  24  DAVIES  V.  WILKINSON.  [§  5] 

10  Adolphus  &  Ellis  (Q.  B.)  9S.—  1839. 

On  the  trial  the  plaintiff  gave  in  evidence  the  following  document: 

"  I  agree  to  pay  to  Mr.  Charles  Davies,  or  his  order,  the  sum  of  695/.,  at  four 

instalments,  viz.,  the   first  instalment  to  be   paid  on  Monday  next,  June  loth, 

1833,  being  200/.;  the  second  on  the  settling  day  at  Doncaster  after  the  St. 
Leger,  being  150/.;  the  third   on  the   settling  day  at  Doncaster,  after  Epsom, 

1834,  being  150/.;  and  the  fourth  on  the  settling  day  at  Doncaster,  after  the  St. 
Leger,  1834.  being  100/.;  the  remainder.  95/.,  to  go  as  a  set-off  for  an  order  of 
Mr.  Reynolds  to  Mr.  Thompson,  and  the  remainder  of  his  debt  owing  from 
C.  Davies  to  him.     (Signed)  James  Wilkinson." 

The  defendant's  counsel  objected  that  the  instrument  was  a 
promissory  note,  and  should  have  been  stamped  accordingly. 

Lord  Denman,  C.  J.  —  The  first  objection  is,  that  this  instrument 
was  improperly  received  in  evidence,  being  a  promissory  note  not 
duly  stamped.  It  is  a  note,  up  to  a  certain  point,  but  it  ends,  "  95/. 
to  go  as  a  set-off  for  an  order  of  Mr.  Reynolds  to  Mr.  Thompson, 
and  the  remainder  of  his  debt  owing  from  C.  Davies  to  him." 
I  think  that  takes  from  it  the  character  of  a  promissory  note,  and 
make    it  an  agreement,  and  that  it  was  properly  received.' 


§  24  LEONARD  V.  MASON.  [§  5] 

I  Wendell  (N.  Y.)  522.— 182S. 

Error  from  the  Onondaga  Common  Pleas.  A.  Leonard  sued 
Mason  in  a  Justice's  Court,  on  an  order  for  the  payment  of  money 
accepted  by  Mason.  The  plaintiff  held  a  promissory  note  against 
one  N.  Leonard  for  $34.48,  underneath  which  was  written  an  order 
or  bill  of  exchange,    in   these   words:     "  Levi   ALason,  Esq.,  please 


'An  order  directing  the  drawee  to  pay  $400,  and  take  up  the  drawer's  note 
given  to  A  B,  is  not  a  bill.  "  The  essential  qualities  of  a  bill  or  note  are 
(i)  that  it  be  payable  at  all  events;  not  dependent  on  any  contingency,  nor 
payable  out  of  any  particular  fund;  and  (2)  that  it  be  for  the  payment  of  money 
only,  and  not  for  the  performance  of  some  other  act,  or  in  the  alternative." — 
Cook  V.  Sattcrlee,  6  Cow.  (N.  Y.),  loS.  Accord:  Killam  v.  Schoeps,  26  Kans.  310; 
Blinker  v.  Atkearn,  35  Me.  364.  —  Ed. 


II.  6.]  MUST   NOT   PROMISE   ADDITIONAL   ACT.  229 

pay  the  above  note,  and  hold  it  against  me  in  our  settlement.  N 
Leonard."  The  justice  gave  judgment  for  the  defendant,  and  the 
plaintiff  appealed  to  the  Onondaga  Common  Pleas.  On  the  trial  in 
that  court,  the  note,  with  the  order  written  thereunder,  were  pro- 
duced, and  a  presentment  to,  and  a  parol  acceptance  and  promise  to 
pay  by,  the  drawee  proved.  The  Common  Pleas  nonsuited  the  plain- 
tiff, holding  the  promise  of  the  defendant  to  be  within  the  statute 
of  frauds. 

By  the  Coio-f,  Savage,  Ch.  J. — The  only  question  is,  whether 
the  order  which  the  defendant  accepted  is  a  good  bill  of  exchange: 
if  so,  a  parol  acceptance  is  good.'  It  is  supposed  that  this  case 
depends  on  the  same  principles  as  the  case  of  Cooke  v.  Sattcrlce  &= 
Satterlee  (6  Cowen,  loS).  The  rule  there  recognized  is,  that  a  bill 
of  exchange  must  be  for  the  payment  of  money,  and  nothing  else. 
In  that  case,  the  drawees  were  required  to  pay  a  certain  sum  of 
money,  and  take  up  a  note  given  by  the  drawer  to  a  third  person. 
Here  it  is  to  pay  a  note,  which  is  referred  to  merely  to  ascertain 
the  amount;  and  the  retaining  the  note  as  a  voucher  is  no  more  the 
performance  of  another  act  beside  the  payment  of  the  money  than 
the  retaining  the  order  itself  for  the  same  purpose. 

The  court  erred.  The  judgment  must  be  reversed,  and  a  venire 
de  novo  is  awarded  to  Onondaga  Common  Pleas. ^ 


(J))  Exceptions:     (i)  Authorizing  sale  of  collateral. 

§  24  VALLEY  NATIONAL  BANK  v.  CROWELL.          [§  5] 

14S  Pennsylvania  State,  2S4. —  1S92. 

Actions  on  promissory  notes. 

The  defense  set  up  by  the  affidavit  was  that  there  was  no  technical 
liability  as  indorsers  on  the  part  of  defendants,  because  of  the  non- 
negotiability  of  the  notes  sued  on.  These  notes  contained,  in 
addition  to  the  ordinary  form  of  note,  the  clause  which  is  quoted  in 
the  opinion  of  the  Supreme  Court. 

The  court  below,  Sadler,  P.  J.,  of  the  Ninth  judicial  district, 
specially  presiding,  made  the  rules  absolute  in  both  cases,  and 
defendants  appealed. 

Errors  assigned  were  making  the  rule  absolute  and  entering  judg- 
ment. 

'  But  see  Negotiable  Instruments  Law,  §  220  [132].  —  Ed. 
'  See  also  White  v.  Cushing,  88  Me.  339,  ante,  p.  177. —  Ed. 


230  FORM    REQUIRED.  [ART.  II. 

Per  Curiam,  Mar.  28,  1892: 

The  only  question  in  this  case  was  whether  the  note  in  controversy 
was  negotiable.  It  is  in  the  usual  form  of  negotiable  paper,  but  it 
is  contended  that  its  negotiability  is  destroyed  by  reason  of  the 
following  provision  contained  therein: 

"  Having  deposited  herewith  a  like  amount  of  Crowell  Company  mortgage 
bonds  as  collateral  security,  which  we  authorize  the  holder  of  this  note,  upon 
the  non-performance  of  this  promise  at  r-.aturity,  to  sell  either  at  the  broker's 
board,  or  at  public  or  private  sale,  without  demanding  payment  of  this  note  or 
the  debt  due  thereon,  and  without  further  notice,  and  apply  proceeds,  or  as 
much  thereof  as  may  be  necessary,  to  the  payment  of  this  note  and  all  necessary 
charges,  holding  us,  as  makers  and  indorsers,  responsible  for  any  deficiency." 

We  find  nothing  in  this  to  destroy  the  negotiability  of  the  note. 
While  it  has  been  truly  said  that  a  promissory  note  is  a  courier 
without  luggage,  we  find  nothing  in  the  language  quoted  beyond 
the  statement  that  the  note  is  accompanied  with  certain  collateral. 
The  mere  giving  of  collateral  security  with  a  promissory  note  does 
not  destroy  its  negotiability.  {Arnold  v.  Rock  River  Valley  Union 
R.  R.,  5  Duer,  382;  Towne  v.  Rice,  122  Mass.  67.)  In  Woods  v. 
North  (84  Pa.  407);  Johnston  v.  Speer  (92  Pa.  227),  the  amount  of  the 
note  was  held  to  be  uncertain.  In  Bank  v.  Poillet  (126  Pa.  195),  the 
court  refused  to  hold  the  indorser  liable,  because  the  time  of  pay- 
ment was  not  fixed,  and  in  Bank  v.  McCord  (139  Pa.  52),  the  payment 
was  made  dependent  upon  certain  conditions.  In  the  case  in  hand, 
the  amount  of  the  note  is  not  uncertain,  nor  is  there  any  question 
about  the  time  of  payment.  And  the  payment  is  not  made  dependent 
upon  any  condition  whatever. 

The  agreemnt,  that  if  the  collateral  proves  insufficient  for  the  pay- 
ment of  the  note,  and  all  necessary  expenses  and  charges,  the  makers 
will  be  responsible  for  any  deficiency,  neither  increases  nor  decreases 
the  responsibility  of  the  makers.  It  merely  requires  them  to  do 
what  the  law  would  compel  them  to  do  without  such  an  agreement.' 

We  are  of  the  opinion  that  the  affidavit  of  defense  was  insuffi- 
cient, and  the  judgment  properly  ent-ered. 

Judgment  affirmed. 


{U)  Exceptions  :     (2)  Authorizing  confession  of  iudgment. 

OSBORN  V.  HAWLEY. 

19  Ohio,  130. —  1850. 

Caldwell,   J.  —  The  action   in   the   court  below  was  assianpsit. 
The  plaintiff  declared  as  indorsee  of  a  promissory  note  made  by 

'  See  especially,  ^rw^/o'v.  R.  R.,  ^  Duer  (N.  Y.),  207.  —  Ed. 


II.  6.]  MUST   NOT   PROMISE   ADDITIONAL   ACT.  23 1 

defendant  for  $85.00.  The  declaration  also  contained  the  common 
counts.  The  case  being  at  issue,  the  plaintiff  offered  the  note  in 
evidence,  which  was  ruled  out  by  the  court,  and  the  plaintiff"  non- 
suited. The  refusal  by  the  court  to  permit  the  note  to  go  in  evi- 
dence, is  assigned  for  error.  No  argument  is  presented  on  either 
side,  and  the  bill  of  exceptions  only  shows  that  the  court  decided 
that  the  note  was  not  proper  evidence  in  the  cause. 

On  examination  of  the  record,  we  do  not  see  any  objection  to  the 
note  being  given  in  evidence,  and  we  think  the  court  erred  m  ruling 
it  out.  The  note  has  attached  to  it,  and  forming  a  part  of  the  instru- 
ment, a  power  of  attorney  to  confess  a  judgment,  and  we  presume 
the  court  may  have  held  that  that  fact  would  prevent  its  negotia- 
bility. And  on  that  presumption,  we  would  merely  remark  that  the 
power  of  attorney,  beipg  added  to  the  note,  does  not  in  any  way 
change  the  legal  character  of  the  note,  except  that  it  gives  a  more 
summary  proceeding  for  its  collection.  It  is  still  a  promissory 
note,  and  being  payable  to  order,  is  negotiable  by  indorsement. 
The  power  of  attorney  is  not  negotiable,  and  when  the  legal  title  to 
the  note  is  transferred,  the  power  of  attorney  becomes  invalid,  and 
no  power  whatever  can  be  exercised  under  it,  for  the  benefit  of  the 
indorsee;  and  he  holds  the  note  as  if  no  such  power  had  ever  been 
attached  to  it. 

The  judgment  of  the  Court  of  Common  Pleas  will  be  reversed,  and 
the  cause  remanded  for  further  proceedings.* 


(J?)  Exceptions  :     (3)    Waiving  exemptions. 

§  24  FIRST  NATIONAL  BANK  v.  SLAUGHTER.         |  §  5] 

98  Alabama,  602. —  1S92. 
Action  by  indorsee  against  makers  on  an  instrument  as  follows: 

Patsburg,  Ala.,/«/}'  15,  1889. 
For  value  received,  the  undersigned,  of  the  county  of  Crenshaw,  state  of 
Alabama,  jointly  and  severally  promise  to  pay  to  the  order  of  Montgomery  Iron 
Works,  two  hundred  and  forty-five  dollars,  payable  at  First  National  Bank  of 
Montgomery,  with  interest  until  paid,  and  reasonable  attorney's  fees,  if  col- 
lected by  law,  and  we  hereby  waive  presentation  for  payment,  and  notice  of 
protest  for  non-payment  of  the  sum,  and  also  waive  all  homestead  and  exemp- 
tion laws  as  to  this  debt.  It  is  also  further  understood  and  agreed  that  the 
title  to  the  Loach  wheel  and  Pratt  gin,  for  which  the  note  is  given  in  payment, 
shall  remain  in  said  Montgomery  Iron  Works  until  this  note,  and  interest,  is 
paid  in  full. 

'  Contra:   Overton  v.  Tyler,  3  Barr.  (Pa.)  346.  —  Ed. 


232  FORM    REQUIRED.  [ART.  II. 

After  the  plaintiff  had  offered  the  contract  in  evidence  and  rested, 
the  defendants  offered  to  prove  a  failure  of  the  consideration  for 
which  said  agreement  had  been  executed,  whereupon  the  plaintiff 
objected,  on  the  ground  that  the  contract  sued  on  was  commercial 
paper.  The  court  overruled  the  objection,  and  the  plaintiff  excepted. 
The  court  further  ruled  that  the  clauses  in  said  agreement,  providing 
for  the  retention  of  legal  title  of  the  property  for  which  it  was  given, 
and  the  payment  of  reasonable  attorney's  fees,  rendered  the  instru- 
ment non-negotiable,  and  subject  to  all  set-offs,  etc.  that  it  would 
be  subject  to  in  the  hands  of  the  original  payee.  To  this  ruling  the 
plaintiff  also  duly  excepted.  There  was  much  evidence  offered  by 
the  defendants  under  their  pleas,  and  there  was  judgment  for  the 
defendants.  The  rulings  of  the  court,  as  shown  above,  are  here 
assigned  as  error. 

Coleman,  J.  —  The  instrument  sued  on  possesses  all  the  requisites 
of  commercial  paper.  It  is  made  payable  absolutely  at  a  designated 
bank,  for  a  sum  certain,  and  at  a  definite  time.  The  fact  that  it 
contains  a  provision  for  the  payment  of  attorney's  fees,  a  waiver  of 
exemptions,  or  the  retention  of  the  legal  title  to  the  property  for 
which  it  was  given  as  security  for  the  payment  of  the  debt,  does  not 
impede  its  circulation,  or  impair  its  validity  as  negotiable  paper. 
{Montgomery  v.  Crossthiuaite,  90  Ala.  553;  McGhcc  v.  Imp.  d-'  Tra. 
Bank,  93  Ala.  192.)  The  Circuit  Court  was  in  error  in  holding  that 
the  paper,  the  foundation  of  the  suit,  was  not  commercial  paper.' 

There  are  other  exceptions  reserved,  a  consideration  of  which 
would  lead  to  a  reversal  of  the  case  on  other  grounds;  but  we  are 
of  the  opinion,  that  all  such  questions  will  be  eliminated  from  the 
case  on  another  trial.  The  holder  of  such  paper,  received  in  due 
course  of  trade  before  maturity,  for  a  valuable  consideration,  with- 
out notice,  is  not  affected  by  any  defense  or  equities  which  might  be 
available  to  the  maker  against  the  payee;  and  by  the  express  pro- 
vison  of  the  statute  of  this  state,  "paper  governed  by  the  com- 
mercial law,  negotiated  before  maturity,  is  not  subject  to  set-off  or 
recoupment."     (Code  of  1886,  §  2684.) 

The  evidence  shows  that  plaintiff  became  the  owner,  in  due  course 
of  trade  for  value,  before  maturity.  There  is  no  proof  of  notice  to 
the  plaintiff,  nor  of  facts  calculated  to  put  him  upon  notice,  of  any 
defense  to  the  note.  Under  such  circumstances  the  plaintiff  was 
entitled  to  a  verdict.  {Ross  v.  Drinkard,  35  Ala.  441;  Johnson  \\ 
Hanover  Bank,  88  Ala.  274-5;  Barton  v.  Barton,  75  Ala.  400.) 

Reversed  and  remanded. 

'Accord:  Zimmerman  v.  Anderson,  t^  Pa.  St.  421,  distinguishing  Overton  v-. 
Tyler,  3  Barr.  346.  —  Ed. 


II.  6.]  MUST    NOT    PROMISE   ADDITIONAL   ACT.  233 

(/;)   Exceptions :     (4)    Election   to  require   soinetJiing  in   lieu  of  money. 

§  24  HODGES  V.  SHULER.  [§  5] 

22  New  York,  114. —  1S60. 

The  action  was  against  the  defendants  as  indorsers  of  the  follow- 
ing instrument  or  note: 

Rutland  and  Burlington  Railroad  Company. 
No.  253.  Si.ooo. 

Boston,  April  i.  1S50. 
In  four  years  from  date,  for  value  received,  the  Rutland  and  Burlington 
Railroad  Companj^  promises  to  pay  in  Boston,  to  Islessrs.  W.  S.  &  D.  W.  Shuler, 
or  order,  $1,000,  with  interest  thereon,  payable  semi-annually,  as  per  interest 
warrants  hereto  attached,  as  the  same  shall  become  due;  or  upon  the  surrender 
of  this  note,  together  with  the  interest  warrants,  not  due,  to  the  treasurer,  at 
any  time  until  six  months  of  its  maturity,  he  shall  issue  to  the  holder  thereof 
ten  shares  in  the  capital  stock  in  said  company  in  exchange  therefor,  in  which 
case  interest  shall  be  paid  to  the  date  to  which  a  dividend  of  profits  shall  have 
been  previously  declared,  the  holder  not  being  entitled  to  both  interest  and 
accruing  profits  during  the  same  period. 

T.  FoLLETT,  President. 
Sam.  Henshaw,   Treasurer. 

The  court  decided  that  the  plaintiff  was  entitled  to  recover  against 
the  defendants,  and  gave  judgment  accordingly. 

Wright,  J.  — The  single  question  is,  whether  the  defendants  can 
be  held  as  indorsers.  It  is  insisted  that  they  cannot,  for  the  reasons: 
ist.  That  the  instrument  set  out  in  the  complaint,  is  neither  in  terms 
nor  legal  effect  a  negotiable  promissory  note,  but  a  mere  agreement; 
the  indorsement  in  blank  of  the  defendants,  operating,  if  at  all,  only 
as  a  mere  transfer,  and  not  as  an  engagement  to  fulfill  the  contract 
of  the  railroad  company  in  case  of  its  default;  and  2nd.  That  if  it 
be  a  note,  the  notice  of  its  dishonor  was  insufficient  to  charge  the 
defendants  as  indorsers.     *     *     * 

The  instrument  on  which  the  action  was  brought  has  all  the 
essential  qualities  of  a  negotiable  promissory  note.  It  is  for  the 
unconditional  payment  of  a  certain  sum  of  money,  at  a  specified 
time,  to  the  payee's  order.  It  is  not  an  agreement  in  the  alterna- 
tive, to  pay  in  money  or  railroad  stock.  It  was  not  optional  with 
the  makers  to  pay  in  money  or  stock,  and  thus  fulfill  their  promise 
in  either  of  two  specified  ways;  in  such  case,  the  promise  would  have 
been  in  the  alternative.  The  possibility  seems  to  have  been  con- 
templated that  the  owner  of  the  note  might,  before  its  maturity, 
surrender  it  in  exchange  for  stock,  thus  canceling  it  and  its  money 
promise;  but  that  promise  was  nevertheless  absolute  and  uncon- 
ditional, and  was  as  lasting  as  the  note  itself.     In  no  event  could  the 


234  FORM    REQUIRED,  [ART.  II. 

holder  require  money  and  stock.  It  was  only  upon  a  surrender  of 
the  note  that  he  was  to  receive  stock;  and  the  money  payment  did 
not  mature  until  six  months  after  the  holder's  right  to  exchange  the 
note  for  stock  had  expired.  We  are  of  the  opinion  that  the  instru- 
ment wants  none  of  the  essential  requisites  of  a  negotiable  promis- 
sory note.  It  was  an  absolute  and  unconditional  engagement  to  pay 
money  on  a  day  fixed;  and  although  an  election  was  given  to  the 
promisees,  upon  a  surrender  of  the  instrument  six  months  before  its 
maturity,  to  exchange  it  for  stock,  this  did  not  alter  its  character, 
or  make  the  promise  in  the  alternative,  in  the  sense  in  which  that 
word  is  used  respecting  promises  to  pay.  The  engagement  of  the 
railroad  company  was  to  pay  the  sum  of  $i,ooo  in  four  years  from 
date,  and  its  promise  could  only  be  fulfilled  by  the  payment  of 
the  money,  at  the  day  named. 

[Omitting  the  question  of  notice.] 

I  am  of  the  opinion  that  the  action  was  well  brought  against  the 
defendants  as  indorsers  of  a  negotiable  promissory  note,  and  that 
the  notice  of  its  dishonor  was  sufficient. 

The  judgment  of  the  Supreme  Court  should  be  affirmed. 

All  the  judges  agreed  that  the  instrument  in  suit  was  a  promissory 
note;  Denio  and  Welles,  J  J.,  dissented  on  the  ground  that  the 
notice  of  non-payment  was  insufficient  in  omitting  the  number  upon 
the  margin  of  the  note.' 

Judgment  affirmed.' 


III.  Payable  on  demand  or  at  a  determinable  future  time. 

I.   When  Payable  on   Demand. 
((7)  Payable  at  sight. 

§  26  HART  V.  SMITH.  [§  7] 

15  Alabama,  S07. —  1S49. 

Dargan,  J.  This  was  an  action  of  assumpsit,  on  a  bill  of 
exchange,  drawn  by  the  defendant  in  favor  of  the  plaintiff,  on 
Desha  tS:  Smith,  dated  the  26th  February,  1846,  payable  at  sight. 
The  only  evidence  introduced   to  charge  the  drawer  was  the  bill, 

'  See  §§  166-167  [95-96],  post.  —  Ed. 

'"I  promise  to  pay  to  the  order  of  W,  $55  at  my  store  (or  in  goods  on 
demand),"  is  a  promissory  note.  Hosstatter  v.  Wilson,  36  Barb.  (N.  Y.),  307. 
Contra,  Dennett  \.  Goodwin,  32  Me.  44. —  Ed. 


III.  J  PAYABLE   AT   ASCERTAINABLE    TLME.  235 

and  protest,  showing  a  demand  of  payment  made  of  the  drawees, 
on  the  4th  ot  March,  1846,  and  notice  to  the  drawer.  The  court 
charged  the  jury,  that  the  plaintiff  could  not  recover. 

A  bill,  payable  on  demand,  or  at  any  fixed  time,  need  not  be  pre- 
sented tor  acceptance,  but  a  demand  of  payment,  at  the  time  the 
holder  has  the  legal  right  to  demand  payment,  is  all  that  is  neces- 
sary. And  if  the  bill  be  not  paid,  the  holder  may  protest  it  for  non- 
payment, and  on  his  giving  due  notice  to  the  drawer  and  indorsers, 
their  liability  is  fixed.  {Eva?is  \.  Bridges,  4  Porter,  345;  i  Peters, 
25 ;  2  lb.  170;  Chitty  on  Bills  [loth  ed.J,  272.)  But  when  the  time  of 
payment  is  uncertain,  and  a  presentation  of  the  bill  is  necessary, 
in  order  to  ascertain  and  fix  the  time  of  payment,  as  if  the  bill  be 
payable  at  a  number  of  days  after  sight,  then  the  bill  must  be  pre- 
sented for  acceptance  before  payment  is  demanded.  (Story  on 
Bills,  §  112,  227;  Chitty  on  Bills  [loth  ed.],  272;  Bayley  on  Bills 
[5th  ed.J,  217,  218.)' 

It  is  contended  that  a  bill  payable  at  sight  is  entitled  to  days  of 
grace,  and  therefore  it  must  be  presented  for  acceptance  before 
payment  can  be  demanded. 

I  am  free  to  confess,  that  my  opinion,  untrammeled  by  authority, 
would  incline  me  to  hold,  that  a  bill  of  fuchdinge,  payable  at  sight,  is 
not  entitled  to  days  of  grace,  and  that  payment  may  be  demanded 
on  presenting  the  bill;  which,  if  refused,  would  authorize  the  holder 
forthwith  to  have  it  protested  for  non-payment,  and,  on  giving 
notice  to  the  drawer,  to  hold  him  liable.  But  the  law  seems  to  be 
settled  otherwise.  Judge  Story,  in  his  treatise  on  Bills,  says, 
"  that  days  of  grace  are  allowed  on  all  bills,  whether  payable  at  a 
certain  time  after  date,  after  sight,  or  even  at  sight.  And  although 
there  has  been  some  diversity  of  opinion,  whether  bills  payable  at 
sight  are  entitled  to  days  of  grace,  it  is  now  settled  by  the  deci- 
sions, both  in  England  and  America,  that  days  of  grace  are  allowable 
on  such  bills."  (§  342,  p.  429.  To  the  same  effect,  see  Chitty  on 
Bills  [loth  ed.],  376;  Bayley  on  Bills,  [5th  ed.],  244,  245;  Selwyn's 
N.  P.  [9th  ed.],  351;  Coleman  v.  Sayre,  i  Barnard,  303;  Dehers  v. 
Harriot,  i  Show.  165;  Stephen's  N.  P.,  876.)  Under  the  influence 
of  these  authorities,  I  feel  constrained  to  hold  that  a  bill  payable  at 
sight  is  entitled  to  days  of  grace;  consequently  a  demand  of  pay- 
ment made  of  the  drawer,  upon  the  first  presentation  of  the  bill  to 
him,  is  insufficient  to  charge  the  drawer,  for  the  bill  is  not  then 
due.  As  there  was  no  evidence  of  any  previous  presentation  of  the 
bill  for  acceptance,  nor  notice  given  of  non-acceptance,  the  demand 
of  payment  was  prematurely  made  and  was,  therefore,  a  nullity. 

'  Neg.  Inst.  L.,  §  240  [143]. — Ed. 


236  FORM    REQUIRED.  [ART.  II. 

As  the  evidence  fails  to  show  a  demand  of  payment  on  the  day  the 

bill  was  payable,  the  court  correctly  instructed  the  jury  that  the 

plaintiff  could  not  recover. 

Let  the  judgment  be  affirmed.' 


(F)  No  time  for  pa\'77ient  expressed. 

§  26  HERRICK  V.  BENNETT.  [§  7] 

S  Johnson  (N.  Y.)  374.— iSii. 

Assumpsit  on  a  promissory  note.  The  first  count  of  the  plain- 
tiff's declaration  stated,  that  the  defendant,  on  May  25,  1S09,  at, 
etc.,  made  his  certain  promissory  note  in  writing,  subscribed,  etc., 
and  then  and  there  delivered  the  same  to  the  plaintiff,  by  which 
said  note  the  defendant  promised  to  pay  to  the  plaintiff,  or  order, 
^112.53;  by  reason  whereof,  etc.  There  was  a  demurrer  to  this 
count  of  the  declaration,  which  was  submitted  to  the  court  without 
argument. 

Per  Curiam.  It  is  to  be  presumed  that  the  plaintiff  has  stated 
the  note  in  his  declaration,  according  to  the  terms  of  it,  and  that  is 
sufficient.  The  conclusion  of  the  law  is,  that  where  no  time  of  pay- 
ment is  specified  in  a  note,  it  is  payable  immediately.  The  first 
count,  then,  shows  a  cause  of  action,  and   the  plaintiff  is  entitled  to 

judgment. 

Judgment  for  the  plaintiff.' 


{/)  Issued^  accepted  or  indorsed  7vhen  overdue. 

§  26  BERRY  V.  ROBINSON.  [§  7] 

9  Johnson  (N.  Y.)  121. —  1S12. 

Assumpsit  against  defendant  as  indorser  of  a  promissory  note, 
negotiated  when  overdue.  No  proof  of  demand  or  notice.  Plaintiff 
nonsuited. 

'Accord:  Knott  \.  Venable,  42  Ala.  1S6;  Cribhs  v.  Adams,  13  Gray  (Mass.)  597; 
IVals/i  V.  Dart,  12  Wis.  635;  Lucas  v.  Ladeiv,  2S  Mo.  342. 

Contra:  JVast;  v.  Martin,  i  E.  D.  Smith  (N.  Y.  C.  P.)  505,  where  a  very  full 
and  learned  discussion  of  the  subject  will  be  found.  —  Ed. 

'Accord:  Bacon  v.  Page,  i  Conn.  404;  Jones  v.  Brown,  11  Oh.  St.  601;  3/esstnore 
V.  Morrison,  172  Pa.  St.  300;  Bank  v.  Price,  52  Iowa,  570;  Lihby  v.  Mikelborg,  28 
Minn.  3S;  Roberts  v.  Snow,  27  Neb.  425.  —  Ed. 


III.]  PAYABLE   AT   ASCERTAINABLE   TLME.  237 

Per  Curiam.  The  plaintiff  was  properly  nonsuited  for  not 
proving  demand  of  payment  on  the  maker,  and  notice  of  his  default 
to  the  indorser.  Though  the  note  was  indorsed  long  after  it  was 
due,  yet  the  indorsee  took  it  subject  to  this  condition.  The  books 
make  no  distinction,  on  this  point,  whether  a  note  be  indorsed 
before  or  after  it  is  due.  The  indorsement,  in  every  case,  where  a 
drawer  really  exists,  is  a  conditional  contract  to  pay  in  the  event  of 
a  demand,  or  due  diligence  to  make  a  demand  on  the  maker,  and  his 
default.  It  was  equivalent  in  this  case  to  an  order  on  the  drawer 
to  pay  the  amount.     The  motion  to  set  aside  the  nonsuit  is  denied. 

Motion  denied. 


LEAA^TT  V.  PUTNAM. 
3  New  York,  494. —  1S50. 
[Reported  herein  at  p. .] 


§  26  LIGHT  V.  KINGSBURY.  [§  7] 

50  Missouri,  331. —  1S72. 

Adams,  Judge.  *  *  *  -q^^  jt  jg  unnecessary  to  review  any  of 
the  positions  assumed  by  counsel  in  this  case,  as  the  petition  on  its 
face  does  not  state  facts  sufficient  to  constitute  a  cause  of  action 
against  the  defendants  as  indorsers  of  this  note.  It  is  a  negotiable 
note,  indorsed  after  due.  Such  indorsement  is  equivalent  to  draw- 
ing a  new  bill  at  sight,  and  the  same  diligence  in  making  demand 
and  giving  notice  is  required  to  charge  the  indorsers.  (See  Davis 
V.  Francisco,  11  Mo.  572,  opinion  of  Scott,  J.;  also  Moody  ct  al.  v. 
Mack,  43  Mo.  210;  Berry  v.  Robinson,  9  Johns.  121;  McKinney  v. 
Crawford,  8  Serg.  &  R.  351;  Rugby  v.  Davidson,  2   Mills   Const,  n.) 

The  petition  alleges  that  the  indorsement  w^as  made  about  the 
19th  of  April,  and  alleges  a  demand  and  refusal  on  the  3d  of  July 
following,  and  gives  no  excuse  whatever  for  the  delay.  Even  if  this 
petition  could  be  held  good  after  verdict,  there  was  nothing  in  the 
evidence  to  justify  che  delay  in  presenting  the  note  for  payment, 
and  the  indorsers  were  discharged  by  such  delay.' 

Judgment  affirmed.     The  other  judges  concur. 

'Accord:  Bassoi/torst  v.  lVill>y,  45  Ohio  St.  333  (delay  from  July  30  to  Nov.  21). 
See  Neg.  Inst.  L.,  §  131  [71].  —  Ed. 


238  FORM    REQUIRED.  [ART.  II. 

2.  When  Payable  at  a  Fixed  or  Determinable  Future  Time. 
(a)  A  Jixed  time  after  date  or  sight. 

§  23  SIEGEL  V.  CHICAGO,  ETC.,  CO.  [§  4] 

131  Illinois,  569. 
[^Reported  herein  at  p.  190.] 


Qi)  On  or  before  a  fixed  or  determinable  time  specified. 

§  23  JORDAN  V.  TATE.  [§  4] 

19  Ohio  State,  586. —  1869. 

Motion  for  leave  to  file  a  petition  in  error  to  reverse  a  judgment 
of  the  District  Court  of  Montgomery  county,  affirming  the  judgment 
of  the  Court  of  Common  Pleas. 

By  the  Court:  The  negotiable  character  of  a  promissory  note 
is  not  affected  by  the  fact  that  it  is  made  payable  by  its  terms  on  or 
before  a  future  day  therein  named.  Though  the  maker  has  a  right 
to  pay  such  note  at  any  time  after  its  date,  yet  for  all  purposes  of 
negotiation  it  is  to  be  regarded  as  a  note  payable  solely  on  the  day 

therein  named. 

Motion  overruled.^ 


23 


RIKER  V.  SPRAGUE  MFG.  CO.  [§  4] 

14  Rhode  Island,  402. — 1884. 
\^Reported  herein  at  p.  203.] 


23 


COTA  V.   BUCK.  [§  4] 

7  Metcalf  (Mass.)  588.—  1844. 
^Reported  herein  at  p. iSi  ] 


'Accord:  Mattisonv.  Marks,  2,1  Mich.  421.     Contra:   Stultsv.  Sitva,  119  Mass. 
137.— Ed. 


III.]  PAYABLE    AT   ASCERTAINABLE    TIME.  239 

§  23  PAGE  r.  COOK.  [§  4J 

164  Massachusetts,  116. —  1S95. 
Contract  upon  the  following  promissory  note: 


Boston,  May  i,  1S91.  On  demand,  after  date,  I  promise  to  pay  to  the 
order  of  Hollis  Bowman  Page  five  hundred  dollars,  payable  when  payor  and 
payee  mutually  agree.     Value  received.     Grace  V.  Cook. 

Trial  in  the  Superior  Court,  before  Sheldon,  J.,  who  directed 
the  jury  to  return  a  verdict  for  the  defendant,  and  reported  the  case 
for  the  determination  of  this  court,  in  substance  as  follows: 

It  appeared  that  the  note  was  given  by  the  defendant  to  the 
plaintiff  in  consideration  of  the  sum  of  five  hundred  dollars,  deliv- 
ered by  him  to  her.  There  was  no  evidence  that  the  parties  had 
ever  agreed  upon  a  time  when  the  note  should  become  payable;  but 
it  appeared  that  the  plaintiff  had,  before  the  date  of  the  writ, 
demanded  payment  of  the  defendant,  and  the  defendant  had  refused 
payment;  and  it  was  agreed  that  thirty  dollars  had  been  paid  upon 
the  note. 

If  the  ruling  was  wrong,  the  verdict  was  to  be  set  aside,  and  judg- 
ment was  to  be  entered  for  the  plaintiff  for  the  amount  of  the  note, 
with  interest  from  the  date  of  the  writ,  to  wit,  June  27,  1893;  other- 
wise, judgment  was  to  be  entered  on  the  verdict. 

Morton,  J.  According  to  the  literal  construction  of  this  note, 
although  the  defendant  promises  to  pay  the  plaintiff  the  sum  named 
when  he  demands  it,  she  may  escape  the  performance  of  this  promise 
by  refusing  to  agree  with  the  plaintiff  when  it  shall  be  paid.  We 
think  that  it  hardly  could  have  been  the  intention  of  the  parties  to 
put  it  into  the  power  of  the  defendant  thus  to  avoid  payment,  and 
that  it  is  more  reasonable  to  construe  it  as  meaning  that  it  is  pay- 
able when  and  after  the  payor  ought  reasonably  to  have  agreed. 
{White  N.  S/h\'I,  5  Pick.  425;  Sloattv.  Jfayden,  no  Mass.  141;  Black 
V.  Bachelder,  120  Mass.  171;  Hawkins  v.  Graham,  149  Mass.  284; 
Croaker  v.  Holmes,  65  Maine,  195  ;  Works  v.  Hershey,  35  Iowa,  340; 
Lewis  V.  Tipton,  10  Ohio  St.  88.)  The  promise  to  pay  is  absolute. 
It  is  only  the  time  of  payment  which  is  left  to  future  agreement. 
Evidently  it  is  expected  from  the  tenor  of  the  note  that  the  parties 
will  agree,  and  that  a  time  will  be  fixed,  and  that  the  note  will  be 
paid.  But  no  time  is  fixed  within  which  that  agreement  is  to  be 
made.  The  law  will,  therefore,  imply  a  reasonable  time.  Besides 
It  is  the  payment,  not  the  non-payment,  of  the  note  for  whicli  the 
parties  are  providing.  If  the  payor  does  not  within  a  reasonable 
time  agree  when  the  note  shall  be  paid,  there  is  nothing  unjust  nor 


240  FORM    REQUIRED.  [ART.  II. 

at  variance  with  the  real  meaning  of  the  contract  in  holding  that 
the  payee  may  thereupon  demand  payment,  and,  if  the  note  is  not 
paid,  proceed  to  collect  it.  The  case  of  Barnard  v.  Cushing,  (4  Met. 
230),  is  distinguishable.  The  question  chiefly  discussed  in  that  case 
was  whether  the  indorsement  on  the  note  constituted  a  part  of  it, 
and  the  court  held  that  it  did.  The  indorsement  expressly  provided, 
not  only  that  the  payees  would  receive  the  amount  of  the  note  when 
convenient  for  the  promisors  to  pay,  but  that  they  would  not  com- 
pel its  payment.  In  bringing  suit  the  payees  proceeded  therefore 
in  direct  violation  of  their  agreement.  Possibly,  if  the  question 
arose  now,  a  different  result  might  be  reached  from  that  arrived  at  in 
that  case. 

According  to  the  terms  of  the  report  the  entry  must  be, 
Verdict  set  aside,  and  judgment  for  the  plaintiff  for  the  amount 
of  the  note,  with  interest  from  the  date  of  the  writ. 


{f)  On  or  at  a  fixed  period  after  the  occurrence  of  a  specified  event. 

§  23  SHAW  V.   CAMP.  [§  4] 

160  Illinois,  425. —  1S96. 

Mr.  Justice  Cartwright  delivered  the  opinion  of  the  court: 
Appellee  filed  a  claim  in  the  County  Court  of  Piatt  county,  against 
the  estate  of  Edward  Swaney,  deceased,  and  the  claim  was  rejected. 
In  the  Circuit  Court,  on  appeal,  there  was  a  trial  by  a  jury  and  a 
verdict  for  the  claimant  for  $852.50,  upon  which  judgment  was 
entered.  The  judgment  was  affirmed  by  the  Appellate  Court  and  a 
certificate  of  importance  granted,  under  which  the  case  is  brought 
to  this  court.  On  the  trial  the  claimant  offered  in  evidence  the 
instrument  upon  which  his  claim  was  founded,  together  with  proof 
of  the  signature  of  the  deceased.     The  instrument  was  as  follows: 

S750.00  Bemext,  lLL.,Z)cr.  27,  1S90. 

After  my  death  date  I  promise  to  pay  E.  Hanson  Camp,  or  order,  the  sum  of 
$750,  without  interest  at  per  cent,  per  annum  from  date,  value  received." 

Following  the  above  there  was  a  power  of  attorney,  in  the  usual 
form,  to  confess  judgment,  and  the  signature  of  Edward  Swaney. 
To  the  introduction  of  this  instrument  objection  was  made  and 
overruled,  and  it  is  insisted  that  the  ruling  was  wrong,  for  the 
reason  that  the  instrument  was  not  a  promissory  note.  It  is  con- 
ceded that  a  promissory  note  may  be  made  payable  on  the  death  of  a 
certain  person,  or  at  a  fixed  time  thereafter,  or  on  demand  after  such 


III.]  PAYABLE   AT   ASCERTAINABLE   TIME.  24I 

death;  but  it  is  claimed  that  this  instrument  was  not  payable  at  a 
time  fixed,  and  that  the  words  "after  my  death  date  "  should  be 
construed  to  mean  some  uncertain  time  after  that  event.  We  do 
not  regard  the  instrument  as  subject  to  the  objection  made.  It  did 
not  become  due  until  the  death  of  the  maker,  which  was  an  event 
certain  to  occur,  but  by  its  terms  it  became  due  at  once  after  the 
occurrence  of  that  event.  There  is  nothing  in  the  language  to 
indicate  that  the  money  was  to  be  paid  at  some  uncertain  time  after 
the  maker's  death.     The  objection  was  properly  overruled.' 


3.  When  Payable  on  a  Contingency. 

§  23  KELLEY  V.  HEMMINGWAY.  [§  4] 

13  Illinois,  604. —  1S52. 

Treat,  C.  J.  This  was  an  action  brought  by  Hemmingway 
against  Kelley  before  a  justice  of  the  peace,  and  taken  by  appeal  to 
the  Circuit  Court.  On  the  trial  in  the  latter  court,  the  plaintiff 
offered  in  evidence  an  instrument  in  these  words: 

Castleton,  April  27,  1844. 
Due  Henry  D.  Kelley  fifty-three  dollars,  when  he  is  twenty-one  years  old,  with 
interest. 

David  Kelley. 

\_0n  the  back  of  'which  zoas  this  indorsement] 

ROCKTON,  May  i,  1849. 
Signed  the  within,  payable  to  Moses  Hemmingway. 

Henry  Kelley. 

The  plaintiff  proved  that  the  payee  became  of  age  in  August, 
1849.  The  defendant  objected  to  the  introduction  of  the  instru- 
ment because  it  was  not  negotiable,  but  the  court  admitted  it  in 
evidence  and  rendered  judgment  for  the  plaintiff. 

Our  statute  makes  promissory  notes  assignable  by  indorsement  in 
writing,  so  as  absolutely  to  vest  the  legal  interest  in  the  assignee. 
Was  the  instrument  in  question  a  promissory  note?  To  constitute  a 
promissory  note,  the  money  must  be  certainly  payable,  not  depend- 
ent on  any  contingency,  either  as  to  event,  or  the  fund  out  of  which 
payment  is  to  be  made,  or  the  parties  by  or  to  whom  payment  is  to 

'  A  bill  or  note  payable  so  many  days  after  the  death  of  a  party  is  certain  as 
to  time,  because  the  time  is  sure  to  arrive.  Colehan  v.  Cooke,  Willes,  393: 
affirmed  2  Str.  1217;  Bristol  v.  Warner,  19  Conn.  T,  post,  p.  ;    Conn  v.    Thorn- 

ton, 46  Ala.  587;  Price  v.  Jones,  105  Ind.  543;  Carnwright  v.  Gray,  127  N.  Y.  92; 
Hegemati  v.  Moon,  131  N.  Y.  462;  ante,  p.  168;  Martin  v.  Stone,  (N.  H.),  29  Atl.  845. 
—Ed. 

negot.  instruments  —  l6 


242  FORM    REQUIRED.  [ART.  II. 

be  made.  If  the  terms  of  an  instrument  leave  it  uncertain  whether 
the  money  will  ever  become  payable,  it  cannot  be  considered  as  a 
promissory  note.  (Chitty  on  Bills,  134.)  Thus,  a  promise  in  writ- 
ing to  pay  a  sum  of  money  when  a  particular  person  shall  be  married 
is  not  a  promissory  note,  because  it  is  not  certain  that  he  will  ever 
be  married.  {^Pearson  v.  Ganet,  4  Mod.  242;  Bcardesley  v.  Baldwin ^ 
2  Strange,  1151.)  So  of  a  promise  to  pay  when  a  particular  ship 
shall  return  from  sea,  for  it  is  not  certain  that  she  will  ever  return. 
{Palmer  v.  Pratt,  2  Bing.  185;  Coolidge  v.  Ruggles,  15  Mass.  3S7.) 
In  all  such  cases,  the  promise  is  to  pay  on  a  contingency  that  may 
never  happen.  But  if  the  event  on  which  the  money  is  to  become 
payable  must  inevitably  take  place,  it  is  a  matter  of  no  importance 
how  long  the  payment  may  be  suspended.  A  promise  to  pay  a  sum 
of  money  on  the  death  of  a  particular  individual  is  a  good  promis- 
sory note,  for  the  event  on  which  the  payment  is  made  to  depend 
will  certainly  transpire.  {Colehan  v.  Cooke,  Willes,  393;  s.  c.  2 
Strange,  1217.) 

In  this  case,  the  payment  was  to  be  made  when  the  payee  should 
attain  his  majority  —  an  event  that  might  or  might  not  take  place. 
The  contingency  might  never  happen,  and  therefore  the  money  was 
not  certainly  and  at  all  events  payable.  The  instrument  lacked  one 
of  the  essential  ingredients  of  a  promissor)^  note,  and  consequently 
was  not  negotiable  under  the  statute.  The  fact  that  the  payee  lived 
till  he  was  twenty-one  years  of  age  makes  no  difference.  It  was 
not  a  promissory  note  when  made,  and  it  could  not  become  such  by 
matter  ex  post  facto.  The  plaintiff  has  not  the  legal  title  to  the 
instrument.  If  it  presents  a  cause  of  action  against  the  maker,  the 
suit  must  be  brought  in  the  name  of  the  payee.  The  case  of  Goss 
v.  Nelson,  (i  Burr.  226),  is  clearly  distinguishable  from  the  present. 
There,  the  note  was  made  payable  to  an  infant  when  he  should  arrive 
at  age,  and  the  day  when  that  was  to  be  was  specified.  The  court 
held  the  instrument  to  be  a  good  promissory  note,  but  expressly  on 
the  ground  that  the  money  was  at  all  events  payable  on  the  day 
named,  whether  the  payee  should  live  till  that  time,  or  die  in  the 
interim;  and  it  was  distinctly  intimated,  that  the  case  would  be  very 
different  had  the  day  not  been  stated  in  the  note.  It  was  regarded 
as  an  absolute  promise  to  pay  on  the  day  specified,  and  no  effect 
was  given  to  the  words  that  the  payee  would  then  become  of  age. 

The  judgment  must  be  reversed. 

Judgment  reversed. 


III.]  PAYABLE   AT   ASCERTAINABLE   TIME.  243 

§  23  ELDRED  V.  MALLOY.  [§  4] 

2  Colorado,  320. —  1874. 

Assumpsit  upon  a  written  instrument  in  this  form: 

Golden  City,  Col.  Ter.,  May  20,  1870, 
Nine  months  after  date,  for  value  received,  I  promise  to  pay  J.  A.  Remington, 
or  order,  five  liundred  dollars,  without  defalcation  or  discount,  at  Golden  City, 
Colorado.  The  consideration  of  the  above  is  that  if  the  railroad  is  completed 
and  cars  running  to  a  point  inside  the  Table  Mountains,  at  Golden  City,  Colo- 
rado Territory,  on  or  before  the  20th  of  February,  A.  D.  1871,  the  above  sum 
will  be  duly  paid  to  the  before  mentioned  J.  C.  Remington;  otherwise  the  obli- 
gation will  be  null  and  void. 

Stephen  Eldred. 

Remington    assigned    to    Gorman,    and    the    latter    assigned    to 
defendant  in  error,  who  was  plaintiff  below. 
The  plaintiff  had  jtidgment. 

Belford,  J.  —  [Omitting  the  question  as  to  wagers.]  —  There  is 
another  objection  equally  fatal.  The  instrument  sued  on  is  not 
negotiable.  To  constitute  a  promissory  note  the  money  must  be 
certainly  payable,  not  dependent  on  any  contingency,  either  as  to 
time  or  the  fund  out  of  which  payment  is  to  be  made,  or  the  parties 
by  or  to  whom  payment  is  to  be  made.  If  the  terms  of  an  instrument 
leave  it  uncertain  whether  the  money  will  ever  become  payable,  it 
cannot  be  considered  as  a  promissory  note.  In  this  case  payment 
was  to  be  made  if  the  railroad  reached  a  given  point  at  a  given  time. 
If  the  point  was  not  reached  within  the  time,  then  the  instrument 
was  to  be  null  and  void.  The  contingency  might  never  happen,  and 
therefore  the  money  was  not  certainly,  and  at  all  events,  payable. 
The  instrument  then  lacked  an  essential  ingredient  of  a  promissory 
note,  and  consequently  was  not  negotiable  under  the  statute.  The 
fact  that  the  railroad  did  get  there  in  time  makes  no  difference.  It 
was  not  a  promissory  note  when  made,  and  it  could  not  become  so 
by  matter  ex  post  facto.  The  plaintiff  has  not  the  legal  title  to  the 
instrument,  and  could  not  bring  the  suit,  and  the  defendant's  objec- 
tion to  its  introduction  in  evidence  should  have  been  sustained. 

We  will  reverse  the  judgment  without  remanding  the  cause,  and 

the   plaintiff   in   error  will  recover  his  costs,  both  here  and   in   the 

court  below. 

Reversed. 


§  23   [4]    DuFFiELD   V.   Johnston,    96   New  York,    369.  —  1884. 
Earl,  J.     This  action  was  brought  to  recover  the  last  two  payments 


244  FORM    REQUIRED.  [ART.  II. 

mentioned  in  the  following  instrument  dated  at  New  York,  December 
21,  1878. 

Thomas  Johnston,  Esq. : 

Dear  Sir.  — (i)  Please  pay  to  J.  J.  Duffield,  or  order,  the  sum  of  six  hundred 
and  sixty-six  dollars  when  the  brown  stone  work  of  your  eight  houses  situate 
on  the  south  side  of  East  One  Hundred  and  Fifth  street,  between  Second  and 
Third  avenues,  city,  is  topped  out. 

(2)  The  sum  of  four  hundred  dollars  when  the  stoops  of  said  eight  houses  are 
set. 

(3)  The  sum  of  three  hundred  and  seventy-five  dollars  when  the  brown  stone 
work  of  the  said  eight  houses  is  completed;  and  charge  the  same  to  me,  and 
oblige  yours,  etc., 

Wm.  Chave, 

Across  the  face  of  this  instrtiment  was  written  by  the  defendant 
these  words:   "Accepted,  Thomas  Johnston." 

The  order  was  not  a  bill  of  exchange,  because  it  was  not  abso- 
lutely payable.  {Cook  v.  Saftcr/cc,  6  Cow.  108;  Scacord  \.  Burling,  5 
Denio,  444;  Va/i  JVagiier  v.  Tcrrctt,  27  Barb.  181;  Prindle  v.  Cariith- 
ej-s,  15  N.  Y.  426.)  It  was  payable  only  upon  condition  that  the 
works  should  be  done  as  specified,  and  might  never  become  payable. 
It  cannot,  therefore,  have  the  force  or  effect  of  a  bill  of  exchange. 
It  does  not  purport  upon  its  face  to  be  founded  upon  any  considera- 
tion, and  none  can  be  presumed.  Hence  it  was  necessary  for  the 
plaintiff  to  prove  the  consideration  upon  which  it  was  given,  and 
that  brought  into  the  case  all  the  circumstances  under  which  it  was 
given. 

§  23  [4]  Sackett  v.  Palmer,  25    Barbour  (N.  Y.),  179.  —  1857. 

Action  on  a  note  payable  "  ninety  days  after  the  dissolution  of 
the  partnership  between  A.  B.  and  C.  D.,  and  the  settling  of  the 
books  of  said  firm."  Johnson,  J.  The  instrument  on  which  the 
action  is  brought  is  not  a  promissory  note.  It  is  payable  ninety  days 
after  the  happening  of  two  events,  one  of  which  may  never  happen. 
The  general  rule  is,  that  an  instrument  payable  only  in  money, 
is  not  a  promissory  note,  unless  it  is  payable  at  all  events,  not 
depending  on  any  contingency.  Though  if  the  event  on  which  the 
instrument  is  to  become  payable  must  inevitably  happen,  it  is  no 
objection  that  it  is  uncertain  when  it  will  happen;  nor  is  it  of  any 
importance  how  long  the  payment  may  be  in  suspense;  it  will  still 
be  regarded  as  a  promissory  note.  (Chit,  on  Bills  [8th  Am.  ed.], 
i55»  156)  It  is  not  shown  by  the  evidence  how  long  the  partnership 
was  to  continue  by  the  agreement  of  the  partners.  It  was  certain, 
however,  that  there  would  at  some  time  be  a  dissolution,  by  the 
death  of  one  of  the  partners,  if  not  otherwise.     That  event  was  suffi. 


III.]  PAYABLE    AT   ASCERTAINABLE    TIME.  245 

ciently  certain.  But  the  settling  of  the  books  of  the  firm  was  an 
event  which  might  never  happen.  It  would  not  inevitably  happen. 
It  might,  and  probably  would,  after  a  dissolution,  in  due  course  of 
law.  But  that  is  not  enough;  if  it  might  not  happen  the  instrument 
is  not  a  promissory  note. 


g  23         AMERICAN  NATIONAL  BANK  v.  SPRAGUE.        [%  4] 

14  Rhode  Island,  410. —  1884. 

Action  against  indorsers  on  an  instrument  similar  to  the  one  in 
Riker  v.  Sprague  Mfg.  Co.,  [ante,  p.  203),  e.xcept  that  it  was  indorsed 
as  follows: 

"  Issued  as  collateral  to  A.  &  W.  Sprague  Mfg.  Co.'s  draft 
accepted  by  Hoyt,  Spragues  &  Co.,  No.  6806." 

TiLLiNGHAST,  J.  *  *  *  It  will  at  oncc  be  sccn  that  thcsc  notcs 
differ  very  materially  from  those  declared  on  in  the  former  case,  and 
also  that  under  the  rule  therein  adopted  they  are  clearly  not  negotia- 
ble. They  were  issued  as  collateral  to  certain  drafts  therein  specific- 
ally designated,  and  obviously  are  not  payable  at  all  events;  it  being 
evident  that  the  payment  of  the  drafts  would  at  once  discharge  both 
the  makers  and  indorsers  of  the  notes,  and  render  said  notes  null 
and  void.  So  also  a  partial  payment  on  the  drafts  would  at  once 
reduce  the  amount  collectible  on  the  note-,  p?-o  tanto. 

The  undertaking  of  the  defendants,  therefore,  was  at  most  a  con- 
tingent one,  and  the  sum  which  might  become  due  at  the  expiration 
of  the  notes  was  uncertain. 

We  have  patiently  examined  all  of  the  cases  cited  by  the  counsel 
for  the  plaintiff  in  support  of  the  negotiability  of  notes  like  these, 
together  with  numerous  others  bearing  upon  the  same  question,  but 
we  are  unable  to  find  any  support  in  fact  resulting  therefrom.  On 
the  other  hand,  the  current  of  authorities,  both  English  and  Ameri- 
can, is  strongly  against  the  position  taken.  The  cases  of  Costello  v. 
Crowell,  127  Mass.  293,  and  Haskell  n .  Lambert,  16  Gray,  592,  cited 
by  the  defendant's  counsel  state  the  law  correctly.  The  theory, 
therefore,  upon  which  the  plaintiff  has  thus  far  proceeded  is  errone- 
ous and  cannot  be  sustained. 

Whether  the  defendants  are  liable  as  guarantors,  joint  makers,  or 
otherwise,  we  are  not  now  called  upon  to  decide.  We  only  decide 
that,  the  notes  being  not  negotiable,  the  defendants  are  not  liable 
as  indorsers. 

Without  considering  the  other  points  raised  by  the   petition,  we 

must,  therefore,  grant  a  new  trial. 

Petition  granted. 


246  FORM    REQUIRED.  [ART.  II. 

§  23  CITIZENS'  NAT.  BANK  z'.  PIOLLET.  [§  4] 

126  Pennsylvania  State,  194. — 18S9. 
Action  by  holder  against  indorser  upon  the  following  instrument: 

$500.  Towanda,  Pa.,  /v/'.  20,  18S7. 

Three  months  after  date  the  Eureka  Mower  Co.  promise  to  pay  to  the  order 
of  V.  E.  PioUet  five  hundred  dollars  at  the  Citizens'  National  Bank  of  Towanda 
without  defalcation  for  value  received  with  interest  and  without  grace. 

No.  2717.  Eureka  Mower  Co. 

Attest:    E.  T.  Fox,  President.  by  G.  W.  BucK,   Treas. 

This  note  is  given  for  advancements  and  it  is  the  understanding  it  will  be 
renewed  .-t  maturity. 

The  defendant  objected  that  the  words  written  upon  the  face  of 
the  note  made  the  time  of  payment  uncertain  and  destroyed  the 
negotiability  of  the  paper;  therefore,  the  defendant  was  not  liable 
thereon. 

B\  the  Court:  The  objection  is  sustained;  offer  refused;  exception. 

Opinion,  Mr.  Justice  Green:  This  is  an  action  against  the 
indorser  of  a  promissory  note.  He  is  sued  upon  his  contract  of 
indorsement  and  not  upon  any  other  or  independent  special  contract 
in  relation  to  that  indorsement.  His  liability  therefore  in  the  pres- 
ent action  must  be  the  technical  liabilty  of  an  indorser  or  the  suit 
must  fail.  The  note  itself,  without  the  written  memorandum  which 
appears  upon  its  face,  is  a  complete  and  perfect  obligation  of  a  nego- 
tiable character;  and  if  the  written  memorandum  were  not  there,  we 
know  of  no  reason  why  there  should  not  be  a  recovery  against  the 
defendant  as  a  mere  indorser.  But  the  memorandum  is  there;  it  is 
not  alleged  nor  offered  to  be  proved  that  it  is  there  without  author- 
ity, and  if  it  has  a  controlling  effect  upon  the  note,  it  must  be 
treated  as  a  part  of  it.     Its  meaning  is  entirely  plain. 

The  words,  written  across  the  end  of  the  note,  and  on  the  face 
of  it,  in  immediate  proximity  to  the  words  of  the  note,  are,  "  This 
note  is  given  for  advancements,  and  it  is  understood  it  will  be  re- 
newed at  maturity. ' '  The  statement  that  it  is  given  for  advancements 
does  not  affect  the  certainty  of  the  note,  and  it  could  easily  be 
regarded  as  a  mere  memorandum  not  changing  the  contract  and 
therefore  not  material.  But  the  remainder  of  the  writing  is  an 
agreement  that  the  note  will  be  renewed  at  maturity.  As  the  bank 
is  the  holder  and  discounted  the  note  when  it  was  given,  it  is  un- 
doubtedly affected  by  the  terms  of  the  memorandum,  and  must  be 
considered  as  having  agreed  to  renew  the  note  at  its  maturity.  This 
being  so,  the  obligation  of  the  note  is  not  an  absolute,  unconditional 


III.]  PAYABLE   AT   ASCERTAINABLE   TIME.  247 

contract  to  pay  the  money  at  maturity.  It  is  a  qualified  obligation 
to  pay,  with  a  condition  that,  instead  of  paying,  the  holder  may 
give  another  note  in  its  place  which  the  bank  would  be  bound  to 
accept  instead  of  money.  This  being  so,  the  case  comes  within  the 
rule  that  commercial  paper,  to  be  negotiable,  must  be  certain, 
unconditional,  and  not  contingent. 

In  Overton  v.  Tyler,  (3  Pa.  346),  Gibson,  C.  J.  said:  "But  a 
negotiable  bill  or  note  is  a  carrier  without  luggage.  It  is  requisite 
that  it  be  framed  in  the  fewest  possible  words,  and  those  importing 
the  most  certain  and  precise  contract;  and,  though  this  requisite  be 
a  minor  one,  it  is  entitled  to  weight  in  determining  a  question  of 
intention.  To  be  within  the  statute,  it  must  be  free  from  contin- 
gencies or  conditions  that  would  embarrass  it  in  its  course;  for  a 
memorandum,  to  control  it,  though  indorsed  on  it,  would  be  incor- 
porated with  it  and  destroy  it.  But  a  memorandum  which  is  merely 
directory  will  not  affect  it."  IviWoods  v.  North,  (84  Pa.  407),  Shars- 
wood,  J.  said:  "It  is  a  necessary  quality  of  negotiable  paper  that 
it  should  be  simple,  certain,  unconditional,  not  subject  to  any  con- 
tingency. It  would  be  a  mere  affectation  of  learning  to  cite  the 
elementary  treatises  and  the  decided  cases  which  have  established 
this  principle.  It  is  very  important  to  the  commercial  community 
that  it  should  be  maintained  in  all  its  rigor." 

It  is  manifest  from  the  foregoing  that  the  only  inquiry  necessary 
to  determine  the  question  of  negotiability  is,  the  effect  of  the  memo- 
randum upon  the  terms  of  the  note.  As  we  have  seen,  it  makes  an 
important  change  in  the  note,  in  that,  instead  of  the  note  being  a 
distinct  contract  to  pay  a  fixed  sum  of  money  at  a  day  certain,  the 
holder  has  agreed  to  accept,  instead  of  payment  in  money,  another 
note  payable  at  another  time  which  is  not  fixed.  The  obligation  of 
the  note,  therefore,  is  uncertain,  depending  on  whether  the  maker 
chooses  to  pay  it  or  give  a  new  note  in  place  of  it.  This  uncertainty 
destroys  its  negotiability,  and  for  that  reason  relieves  the  indorser. 
As  this  is  not  an  action  against  the  indorser  to  recover  damages  for 
breach  of  an  agreement  by  him  to  continue  his  indorsement,  that 
aspect  of  the  case  cannot  be  considered. 

Judgment  affirmed.' 

'  It  is  not  clear  what  liability  attaches  to  the  indorsement  of  a  non-negotiable 
note.  If  the  instrument  is  not  a  note  at  all,  because  lacking  an  essential 
element  other  than  words  of  negotiability,  the  indorser  would  seem  to  be  a 
mere  assignor  of  a  common  law  contract.  Sto>y  v.  Lamb,  52  Mich.  525.  If  the 
instrument  is  a  note,  but  non-negotiable,  it  has  been  held  that  an  indorser  is  a 
guarantor.  Seymour  v.  Van  Slyck,  S  Wend.  (N.  Y.)  403;  Cromwell  v.  Hewitt,  40 
N.  Y.  491.  See  4  Am.  &  Eng.  Encyc.  L.,  p.  479.  See/^'j/,  Art.  XVII,  Div.  I,  3. 
—  En. 


248  FORM    REQUIRED.  [ART.  II. 

IV.  Payable  to  order  or  to  bearer. 

I.  Payable  to  the  Order  of  a  Specified  Person.' 
(a)  Payee  must  be  eertain. 

§  27  Mcintosh  v.  lytle.  [§  8] 

26  Minn.  336.  — i8So. 

Appeal  by  plaintiff  from  a  judgment  of  the  District  Court  for 
Ramsey  county,  the  action  having  been  tried  before  Wilkin,  J.,  and 
dismissed  on  the  defendant's  motion. 

GiLFiLLAN,  C.  J.     Action  on  a  writing  as  follows: 

$200.  St.  Paul,  Minn.,  Jan.  22,  1879. 

Dawson  &  Co.,  Bankers:    Pay  to  the  order  of,  on  sight,  two  hundred  dollars, 

in  current  funds. 

E.  Lytle. 

When  presented  to  Dawson  &  Co.,  they  refused  payment,  having 
been  instructed  so  to  do  by  the  defendant. 

A  check  must  name  or  indicate  a  payee.  Checks  drawn  payable 
to  an  impersonal  payee,  as  to  "bills  payable"  or  order,  or  to  a 
number  or  order,  are  held  to  be  payable  to  bearer,  on  the  ground 
that  the  use  of  the  words  "  or  order  "  indicates  an  intention  that 
the  paper  shall  be  negotiable;  and  the  mention  of  an  impersonal 
payee,  rendering  an  indorsement  by  the  payee  impossible,  indicates 
an  intention  that  it  shall  be  negotiable  without  indorsement  —  that 
is,  that  it  shall  be  payable  to  bearer.^  So  when  a  bill,  note,  or 
check  is  made  pa3-able  to  a  blank,  or  order,  and  actually  delivered 
to  take  effect  as  commercial  paper,  the  person  to  whom  delivered 
may  insert  his  name  in  the  blank  space  as  payee,  and  d,  bona  fide 
holder  may  then  recover  on  it.^ 

'  It  is  to  be  observed  that  the  Neg.  Inst.  Law  applies  only  to  instruments  con- 
taining words  of  negotiability.  An  instrument  not  containing  words  of  nego- 
tiability may  be  a  bill  or  note,  but  it  is  not  covered  by  this  Act.  The  English 
Bills  of  Exchange  Act  makes  negotiable  any  bill  or  note  which  does  not  contain 
words  prohibiting  transfer;  but  this  changes  the  law.  Chalmers,  Bills  of 
Exchange  Act  (5th  ed.),  p.  25.  —  Ed. 

'Accord:  Mechanics  Bank  v.  Straiton,  3  Keyes  (N.  Y.),  365;  IViHeis  v.  Phcenix 
Bank,  2  Duer  (N.  Y.),  121.  —  Ed. 

3  That  any  Iwna  fide  holder  may  fill  the  blank  under  an  implied  authority,  see 
Cruchley  v.  Clarance,  2  Maule  &  Selwyn,  90;  Rich  v.  Starbuck,  51  Ind.  87;  DuJi- 
ham  V.  Clogg,  30  Md.  284.  See  Neg.  Inst.  L.,  §  33  [14].  A  note  made  payable 
"  to  the  order  of  the  indorser's  name,"  is  negotiable  by  indorsement;  "  it  is 
like  making  a  note  payable  in  blank,  which  may  be  filled  up  by  Sl  bona  fide 
holder  with  his  own  name."     United  States  v.    U'hite,  2  Hill  (N.  Y.),  59.  —  Ed. 


IV.J  PAYABLE   TO    ORDER   OR   TO   BEARER.  249 

These  cases  differ  essentially  from  the  one  at  bar.  In  the  latter 
case  the  person  to  whom  delivered  is  presumed,  in  favor  of  a  bona 
fide  holder,  to  have  had  authority  to  insert  a  name  as  payee.  In  the 
former  cases  the  instrument  is,  when  it  passes  from  the  hands  of  the 
maker,  complete,  in  just  the  form  the  parties  intend.  But  in  this 
case  there  is  neither  a  blank  space  for  the  name  of  the  payee,  indi- 
cating authority  to  insert  the  payee's  name,  nor  is  the  instrument 
made  payable  to  an  impersonal  payee,  indicating  a  fully  completed 
instrument.  It  is  claimed  that  the  words  "  on  sight  "  are  such 
impersonal  payee.  They  were  inserted,  however,  for  another  pur- 
pose —  to  fix  the  time  of  payment,  and  not  to  indicate  the  payee. 
It  is  clearly  the  case  of  an  inadvertent  failure  to  complete  the  instru- 
ment intended  by  the  parties.  The  drawer  undoubtedly  meant  to 
draw  a  check,  but  having  left  out  the  payee's  name,  without  insert- 
ing in  lieu  thereof  words  indicating  the  bearer  as  payee,  it  is  as 
fatally  defective  as  it  would  be  if  the  drawee's  name  were  omitted. 

Judgment  affirmed. 


§  27  CHAMBERLAIN  v.  YOUNG.  [§  8] 

1893,  2  Queen's  Bench  (C.  A.)  20&. 

Application  b}''  the  plaintiff  for  a  new  trial  of  the  action,  or  that 
judgment  might  be  entered  for  him. 

The  action  was  brought  by  the  plaintiff  as  the  indorsee  for  value, 
against  the  defendant  Tower  as  the  drawer  and  indorser,  of  a  bill  of 
exchange.  The  defendant  Young,  who  was  the  acceptor,  had 
become  bankrupt. 

At  the  trial,  before  Lawrance,  J.,  and  a  jury,  it  appeared  that  the 
bill  bore  date  May  18,  1892,  and  the  material  part  of  it  was  as 
follows: 

Five  months  after  date  pay  to order  the  sum  of  one  hundred  and   fifty 

pounds  for  value  received. 

(Signed)  E.  Malcolm  Tower. 
To  Mr.  A.  J.  Young. 

The  bill  was  accepted  by  Young,  and  was  indorsed  by  Tower,  and 
by  him  handed  to  the  plaintiff  for  value.  It  was  duly  stamped  as  a 
bill  of  exchange.     The  blank  had  never  been  filled  in. 

For  the  defense  it  was  objected  that  the  document  was,  neither 
at  common  law  nor  under  the  Bills  of  Exchange  Act,  1882,  a  bill  of 
exchange,  and  that,  consequently,  an  action  could  not  be  main- 
tained upon  it  as  such.  The  learned  judge  decided  the  point  of  law 
in  favor  of  the  defendant. 

The  plaintiff  applied  for  a  new  trial  or  judgment. 


250  FORM    REQUIRED.  [ART.  II. 

Kay,  L.  T-  Upon  the  question  whether  the  defendant  is  estopped 
by  sec.  55  of  the  Act,  or  otherwise,  from  denying  that  the  document 
is  a  vaHd  bill  f  exchange,  I  express  no  opinion,  because  I  think  it 
does  not  really  arise  in  this  case.  Upon  looking  at  the  document  it 
appears  that  a  blank  is  left  just  before  the  word  "order."  The 
word  "  or  "  does  not  precede  the  word  "  order,"  and  therefore  the 
document  runs,  "  pay  to  order."  It  is  signed  by  the  drawer,  and  he 
is  the  first  indorser,  and  it  is  plain  that  every  one  who  had  anything 
to  do  with  the  document  treated  it  as  a  bill  of  exchange  payable  to 
the  order  of  the  drawer.  That  such  a  document  is  a  good  bill  of 
exchange  has  not  been  denied.  We  asked  in  the  course  of  the 
argument  for  some  authority  that  a  bill  payable  to  the  order  of  the 
drawer  is  not  a  good  bill  of  exchange,  and  no  such  authority  was 
produced.  And  I  find  that  as  long  ago  as  1791,  Eyre,  C.  B.,  in  Gibson 
v.Minet,  (i  H.  Bl.  at  p.  605),  said:  "  Bills  of  exchange  being  of  several 
kinds,  the  title  to  sue  upon  any  one  bill  of  exchange  in  particular  will 
depend  upon  what  kind  of  bill  it  is,  and  whether  the  holder  claims 
title  to  it  as  the  original  payee,  or  as  deriving  from  the  original 
payee,  or  from  the  drawer  in  the  case  of  a  bill  drawn  payable  to  the 
drawer's  own  order,  who  is  in  the  nature  of  an  original  payee." 
I  think  that  this  was  a  good  bill  of  exchange,  the  meaning  of  it 
being,  "  Pay  to  the  order  of  the  drawer,"  and  that  every  one  always 
regarded  it  in  that  light.  The  objection  that  it  was  not  a  bill  of 
exchange  therefore  fails  entirely,  and  that  is  the  only  point  we  have 
now  to  decide,  except  that,  there  not  having  been  a  satisfactory 
trial  of  the  question  of  fraud,  that  question  must  go  back  for  a  new 
trial. 

BowEN,  L.  J.  With  regard  to  tne  question  whether  this  document 
is  a  bill  of  exchange,  if  we  could  have  seen  our  way  to  hold  that  it  is 
not  bill,  there  would  have  been  an  end  of  the  plaintiff's  case,  and 
there  need  not  have  been  a  new  trial.  But,  on  looking  carefully  at 
the  document,  it  is  clear  that  it  is  a  good  bill.  The  case  was  argued 
for  some  time  on  the  assumption  that  the  direction  was  to  "  Pay  to 

,  or  order,"  and  as  if  no  name  of  a  payee  had  been  inserted. 

Bat  in  fact  the  document  i?  not  drawn  in  that  form.  It  directs  pay- 
ment to  be  made  "  t  ■ order,"  and   it  is  signed  by  Tower,  so 

that  the  name  of  the  payee  is  not  omitted.  The  bill  in  its  present 
form  in  effect  directs  payment  "  to  my  order,"  and  this  is  a  form  of 
bill  which  is  perfectly  well  known  to  the  law,  and  perfectly  consist- 
ent with  its  being  a  negotiable  instrument  from  the  moment  when  it 
was  issued. 

Lord  Esher,  M.  R.  also  delivered  a  concurring  opinion. 

Application  for  new  trial  granted. 


IV.]  PAYABLE   TO    ORDER   OR   TO    BEARER.  25 1 

[§  27J  ADAMS  r.   KING.  [§  8J 

16  Illinois,  169. — 1854. 

Action  on  a  promissory  note  payable  to  "  the  administrators  of 
Abner  Chase,  deceased."  Demurrer  to  declaration.  Demurrer 
overruled.     Defendants  appeal. 

ScATES,  J.  The  error  assigned  is  for  overruling  a  demurrer  to 
the  declaration.  It  was  an  assumpsit,  and  contained  two  counts; 
each  upon  a  promissory  note  made  by  plaintiffs  in  error  to  "  the 
administrators  of  Abner  Chase,  deceased,"  for  four  hundred  dollars, 
with  six  per  cent,  interest  from  date,  for  value  received,  dated  7th 
March,  1853,  one  payable  in  six  and  the  other  in  twelve  months. 

The  declaration  further  avers,  that  defendants  were  the  adminis- 
trators of  Abner  Chase  on  the  7th  March,  1853,  with  profert  of  the 
letters  of  administration,  dated  19th  December,  185 1;  and  that  the 
notes  were  executed,  delivered  and  made  payable  to  the  defendants, 
by  the  name  and  style  of  the  "administrators  of  Abner  Chase, 
deceased." 

The  objections  taken  are,  that  this  is  not  a  promissory  note;  that 
there  is  no  payee,  or  that  the  payee  is  uncertain ;  or  if  there  be  a 
payee,  it  is  a  promise  to  defendants  in  the  representative  character, 
and  they  should  sue  as  administrator. 

We  do  not  assent  to  either  objection.  The  general  rule  in  rela- 
tion to  bills  of  exchange  and  promissory  notes  requires  that  the 
person  to  whom  they  are  made  payable,  shall  be  specified.  (Chit, 
on  Bills,  156).  But  this  may  be  done  without  inserting  the  name; 
for  that  is  certain,  which  may  be  rendered  certain;  and  if  the  payee 
be  so  certainly  described  or  referred  to,  as  to  be  easily  ascertained 
by  allegations  and  proofs,  the  promise  will  be  valid.  The  declara- 
tion avers  that  plaintiffs  were  "administrators  of  Abner  Chase, 
deceased,"  at  the  time  these  promises  were  made;  and  that  they 
were  made  to  them  personally,  by  that  designation  and  description. 
These  are  traversable  allegations,  and  must  be  denied  under  oath,  by 
our  statute  as  settled  in  Frye  v.  Menkins,  (15  111.  339).  The  same 
rule  was  applied  in  ascertaining  the  promisors  in  DwigJit  v.  N'ewell, 
(15  111.  333).  They  have  not  sued  as  administrators,  and  it  was 
therefore  unnecessary  to  aver  that  they  were  administrators  at  the 
time  this  action  was  commenced.  The  demurrer  admits  the  promise 
to  be  to  defendants  personally,  by  a  descriptive  phraseology. 

The  case  referred  to  in  Breese,  2,  was  ruled  upon  the  ground  that 
there  was  no  payee,  and  that  in  Breese,  155  was  upon  the  same 
ground.  The  case  of  Berry  v.  Hmvby^  (i  Scam.  468),  was  put  upon 
the  ground  of  a  want  of  power  in  a  county  treasurer  to  take  under 
such  a  promise. 


252 


FORM    REQUIRED.  [ART. II. 


The  cases  in   15  111.  are  decisive  of  this,  in  principle.     The  judg- 
ment must  therefore  be  affirmed. 

Judgment  affirmed.' 


I  27  SHAW  V.  SMITH.  [§  8] 

150  Massachusetts,  166. — i88g. 

Contract  by  the  administrator  tA'  bonis  iion  of  the  estate  of  Fred- 
erick B.  Bridgman,  against  the  administrator  of  the  estate  of  Eugene 
Bridgman,  upon  the  following  instrument: 

$126.00.  Belchertown, /;//>/ 19,  1S73. 

For  value  received,  I  promise  to  pay  F.  B.  Bridgman's  estate,  or  order,  one 
hundred  and  twenty-six  dollars  on  demand,  with  interest  annually. 

Eugene  BRmoMAX. 

Witness,  A.  Bridgman. 

Writ  dated  March  13,  1886.  The  answer  set  up,  among  other 
defenses,  the  statute  of  limitations. 

The  judge  ruled  that  the  instrument  was  not  a  witnessed  promis- 
sory note,  within  the  meaning  of  the  statute,  and  was  therefore 
barred  by  the  statute  of  limitations,  and  found  for  the  defendant; 
and  the  plaintiff  alleged  exceptions. 

C.  Allen,  J.  After  providing  that  the  ordinary  limitation  of 
actions  of  contract  shall  be  six  years,  it  is  enacted  in  the  Pub.  Sts. 
(c.  197,  sec.  6),  that  "  none  of  the  foregoing  provisions  shall  apply 
to  an  action  brought  upon  a  promissory  note  signed  in  the  presence  of 
an  attesting  witness,  if  the  action  is  brought  by  the  original  payee, 
or  by  his  executor  or  administrator;  "  and  by  sec.  7,  such  an  action 
may  be  brought  within  twenty  years.  The  defendant  contends  that 
the  instrument  sued  on  is  not  a  promissory  note,  for  want  of  a  suffi- 
ciently definite  payee,  and  he  cites  two  decisions  which  sustain  him 
in  this  contention.  {Lyon  v.  Marshall,  11  Barb.  241;  Tittle  v- 
Thomas,  30  Miss.  122.) 

But  this  would  be  too  strict  an  application  of  the  doctrine  that 
the  person  to  whom  a  note  is  payable  must  be  clearly  expressed. 
It  is  an  equally  general  rule,  that  it  is  sufficient  if  there  is  in  fact  a 
payee,  who  is  so  designated  that  he  can  be  ascertained.  (Story  on 
Notes,  §  36.)  The  illustrations  of  the  manner  in  which  this  rule 
has  been  applied  are  numerous.  Thus,  written  promises  have  been 
held  to  be  valid  notes  or  bills  of  exchange,  though  made  payable  to 
bearer,  {Grant  v.  Vaughan,  3  Burr.  15 16);  or  to  persons  designated 
'  A  check  drawn  payable  to  a  deceased  person  is  void.  U.  S.  v.  First  iV.  B., 
82  Fed.  R.  410.  —  Ed. 


IV. J  PAYABLE   TO    ORDER   OR   TO    BEARER.  253 

simply  by  their  office,  without  naming  them,  e.  g.  the  treasurer  of 
the  First  Parish  in  H.  or  his  successor  in  said  office,  {Buck  v.  Mer- 
rick,  8  Allen,  123);  the  trustees  of  a  particular  church,  {Noxoii^. 
Smith,  127  Mass.  485;  Holmes  v.  yaques,  L.  R.  i  Q.  B.  376);  the 
manager  of  the  Provincial  Bank  of  England,  {Robertson  v.  S/ieivard, 
I  Man.  &  G.  511);  the  treasurer-general  of  the  Royal  treasury  of 
Portugal,  {Soares  v.  Gly>i,  8  Q.  B.  24);  the  executors  of  the  late  W. 
B.,  {Hamilton  v.  Aston,  i  C.  &  K.  679);  the  administrators  of  a  par- 
ticular estate,  {Moody  v.  Threlkeld,  13  Ga.  55;  Adams  v.  King,  16 
111.  169);  the  trustees  acting  under  the  will  of  the  late  Mr.  W.  B., 
{Megginson  v.  Harper,  2  Cr.  &  M.  322).  Also  to  the  heirs  of  a  par- 
ticular person,  even  though  that  person  was  living  at  the  time, 
{Bacon  N.  Fitch,  i  Root.  181;  Lockwood  v .  yesup^  9  Conn.  272;  Cox 
V.  Beltzhooz'er,  11  Miss.  142);  to  a  business  name  adopted  by  the 
person  in  interest,  {Bryant  v.  Eastman,  7  Cush.  in;  Brown  v. 
Parker,  7  Allen,  337);  and  to  the  steamboat  Juda  and  owners, 
{Moore  v.  Anderson,  8  Ind.  18).  So,  a  bill  which  was  indorsed  to  a 
person  who  was  already  deceased  was  held  valid  in  the  hands  of  his 
legal  representatives.  {Murray  v.  East  India  Co.,  5  B.  &  Aid.  204.) 
More  literally  in  point  in  the  present  case,  and  directly  opposed  to 
the  two  decisions  relied  on  by  the  defendant,  are  Peltier  v.  Babillion, 
(45  Mich.  384),  where  a  written  promise  payable  to  the  order  of 
J.  Y.  Mehling  estate  was  held  to  be  a  good  note,  and  Ale  Kinney  v. 
Harter,  (7  Blackf.  385),  which  was  substantially  similar.  See  also 
Storm  v.  Stirling,  (3  El.  &  Bl.  832;  s.  c.  sub  nom.  Coioiex.  Stirling, 
6  El.  &  Bl.  2,T,T,);  Yates  v.  Nash,  (8  C.  B.  N.  S.  581);  where  a  prom- 
ise to  the  officer  for  the  time  being  of  a  society  was  held  too  indefi- 
nite, though  the  general  rule  as  applied  in  other  cases  was  recognized. 

In  the  case  before  us,  the  promise  was  to  pay  to  F.  B.  Bridgman's 
estate,  or  order.  He  was  dead,  and  administrators  had  been 
appointed.  There  could  be  no  doubt  that  the  promise  was  intended 
to  be  one  of  which  the  administrators  could  avail  themselves.  They 
were  in  existence,  and  were  ascertainable.  If  the  administrators  of 
his  estate  had  been  made  the  payees,  without  naming  them,  there 
can  be  no  shadow  of  question  that  it  would  have  been  sufficient.  It 
savors  of  too  much  refinement  to  hold  that  the  instrument  was  not  a 
valid  promissory  note  for  want  of  a  sufficiently  definite  payee. 

This  is  the  only  question  presented  by  the  bill  of  exceptions. 

Exceptions  sustained.* 

'  A  promissory  note  payable  "  to  the  order  of  the  estate  of  A.,"  is  payable  to 
a  fictitious  payee  where  there  is  no  such  legal  entity  as  the  "Estate  of  A.,"  and 
if  negotiated  by  the  maker  is  to  be  treated  as  a  note  payable  to  bearer.  Lewisohn 
V.  Kent  cr'  Stanley  Co.,  87  Hun  (N.  Y.),  257.  See  Neg.  Inst.  L.,  g  2S  [9],  subsec. 
3.  — Ed. 


254  FORM    REQUIRED.  [ART.  11. 

{b)  Payee  may  be  ( i )  one  not  maker,  drawer  or  drawee. 
[This  is  tlie  normal  case  and  calls  for  no  special  illustration.] 
{b)  Payee  may  be  (2)  the  drawer  or  the  maker. 

§  27  CHAMBERLAIN  v.  YOUNG.  [§  8] 

1S93,  2  O.  B.  206  (C.  A.) 

{^Reported  herein  at  p.  249.]' 


(/')  Payee  may  be  (3)  the  drawee. 

§  27  WITTE  V.  WILLIAMS.  [§  8] 

S  South  Carolina,  290. — 1S76. 

Action  by  indorsee  against  drawer  of  a  bill,  drawn  upon  J.  &  J. 
D.  Kirkpatrick  payable  to  the  order  of  the  said  J.  &  J.  D.  Kirk- 
patrick  and  by  them  indorsed  to  plaintiff.  The  trial  court  held  that 
the  instrument  was  not  a  bill  of  exchange  and  hence  was  open  to  a 
defense  of  fraud. ^ 

Moses,  C.  J.,  (after  disposing  of  another  matter).  The  presiding 
judge,  without  any  exception  to  the  report  of  the  referee  to  the 
character  of  the  instrument  sued  upon,  holds  that  one  of  them  is 
not  a  bill  of  exchange  because  drawn  on  J.  &.  J.  D.  Kirkpatrick, 
requesting  the  drawees  to  pay  to  their  own  order  a  certain  sum  of 
money,  while  a  bill  of  exchange  presupposes  a  duty  on  them  to  pay 
to  some  other  than  themselves.  The  only  authority  relied  on  in 
support  of  the  position  is  found  in  Story  on  Bills,  §  2,^.  With  the 
accustomed  deference  that  is  due  to  so  distinguished  a  jurist  as  the 
late  Mr.  Justice  Story,  we  are  obliged  to  say  that  the  proposition  is 
not  sustainable  on  either  principle  or  authority.  We  are  the  more 
emboldened  to  say  so  because,  in  the  same  section,  the  learned 
writer  thus  expresses  himself:  "Nay,  the  drawer  may  at  once 
become  drawer,  payee  and  drawee;  as,  for  example,  if  he  should 
draw  a  bill  on  himself,  payable  to  his  own  order  at  a  particular 
place,  naming  no  drawee,  and  then  should  indorse  it  over,  the 
indorsee  might  sue  him  as  acceptor  of  the  bill  or  as  maker  of  a 
promissory  note,  at  his  election."  And  in  section  ^6,  he  says, 
"  the  drawee  and  the  payee  may  be  also  one  and  the  same  person." 
But  in  Wildes  v.  Savage,  (i  Story,  29),  he  lays  down  the  rule  in 
direct  contradiction  to  his  affirmation  cited  by  the  presiding  judge 

'  See  also  Moses  v.  Lawrence  Co.  Bk.,  149  U.  S.  2G)%,  post. —  Ed. 
2  Only  so  much  of  the  case  is  given  as  relates  to  this  point.  —  Ed. 


IV.]  PAYABLE   TO    ORDER   OR   TO    BEARER.  _'55 

to  sustain  his  own  conclusion.  We  quote  the  very  words  of  Justice 
Story:  "  The  argument  is  that  the  bill  is  not  a  regular  bill  of 
exchange  because  it  is  drawn  by  Russell  &  Co.,  payable  to  Wildes  & 
Co.,  who  are  the  drawees  of  the  bill.  .  .  .  An  instrument  is 
not  the  less  a  bill  of  exchange  because  all  the  parties  to  it  in  the 
character  of  drawers,  payees  and  drawees,  are  not  different  persons. 
A  bill  drawn  by  a  person  payable  to  his  own  order  has  always  been 
deemed  to  be  a  bill  of  exchange  in  the  commercial  sense  of  the 
phrase,  and  it  would  not  cease  to  be  such  a  bill  if  it  should  be 
indorsed  by  the  drawer  payable  to  the  drawee.  Now,  such  a  bill  so 
indorsed  differs  in  nothing  substantially  from  the  present  bill.  In 
truth,  where  the  bill  is  negotiable,  and  contains  a  drawer,  a  payee 
and  a  drawee,  it  is,  in  a  commercial  sense,  a  bill  of  exchange, 
although  one  or  more  of  the  parties  shall  fill  a  double  character." 

Mr.  Chitty,  in  his  work  on  Bills  (page  25),  says:  "  It  is  not, 
however,  necessary  that  there  should  be  three  parties  to  a  bill; 
there  are  sometimes  only  two;  as  where  a  person  draws  on  another 
payable  to  his  own  order;  and,  indeed,  a  bill  will  be  valid  where 
there  is  only  one  party  to  it,  for  a  man  may  draw  on  himself  payable 
to  his  own  order.  In  such  cases,  however,  the  instrument  may  be 
treated  as,  in  legal  operation,  a  promissory  note,  and  declared  on 
accordingly,  but  in  practice  it  is  usual  to  declare  upon  the  instru- 
ment as  if  it  were  a  bill  not  admitting  the  identity  of  drawer  and 
drawee."  The  objection  thus  taken  by  the  presiding  judge  to  one 
of  the  bills  cannot  prevail,  and,  in  conformity  with  our  views  herein 
expressed,  the  judgment  must  be  set  aside  and  the  case  remanded 
to  the  Circuit  Court  for  a  new  trial.     It  is  so  accordingly  ordered. 


§  27  COMMONWEALTH  v.  BUTTERICK.  [§  8] 

100  Massachusetts,  12. — 1S68. 
\Reported  herein  at  p.  174.] 


(U)  Payee  may  be  (4)  tivo  or  more  payees  joititly. 

§27  GORDON  V.  ANDERSON.  [§  8] 

83  Iowa,  224. — 1891. 

The  plaintiff,  as  assignee  for  value  and  before  maturity  of  two 
promissory  notes,  executed  by  defendants,  payable  "  to  Charles  R. 
Whitesell  et  al.  or  order,"  asks  judgment  thereon,  and  the  foreclos 


256  FORM    REQUIRED.  [ART.  II. 

ure  of  a  mortgage  given  by  the  aefendants  to  secure  the  same. 
The  defendants  answered  that  the  notes  and  mortgage  were  exe- 
cuted for  part  of  the  purchase  price  of  certain  real  estate  sold  to 
them  by  Charles  R.,  Emily,  J.  L.,  and  Phebe  J.,  Whitesell,  and  for 
which  Charles  R.,  J.  L.,  and  Phebe  J.  executed  to  the  defendants  a 
warranty  deed  warranting  the  title  to  said  property.  The  answer 
alleges  a  breach  of  the  covenants  of  warranty,  and  damages  in  the 
sum  of  five  hundred  dollars,  which  the  defendants  ask  as  an  offset 
against  the  notes.  The  plaintiff  demurred  to  the  answer  on  the 
ground  that  the  damages  set  up  were  claims  against  the  payee  of 
the  notes,  and  no  defense  against  the  notes,  in  his  hands,  he  being 
a  purchaser  before  maturity,  and  without  notice;  and  that  the 
answer  sets  up  no  defense  to  said  notes,  as  against  the  plaintiff,  he 
being  an  innocent  holder  for  value  before  maturity.  The  demurrer 
was  sustained,  and  the  defendants  electing  to  stand  upon  their 
answer,  and  refusing  to  plead  over,  a  decree  was  entered  for  the 
plaintiff,  from  which  the  defendants  appeal. 

Given,  J.  The  discussion  is  addressed  entirely  to  the  question 
whether  the  promissory  notes  sued  upon  are  negotiable.  It  will  be 
observed  that  they  are  promises  "  to  pay  to  Charles  R.  Whitesell  ct  al. 
or  order."  The  discussion  is  as  to  the  construction  to  be  given  to 
the  words  "<•/  <z/.,"  and  the  effect  thereof.  The  words  as  here  used 
evidently  mean  "  and  others."  Therefore,  the  notes  are  payable  to 
Charles  R.  Whitesell  and  others  or  order,  without  designating  who 
the  others  are.  To  learn  what  qualities  are  essential  to  a  negotiable 
promissory  note,  says  Mr.  Parsons,  in  his  work  on  Notes  and  Bills, 
(page  30),  "  we  must  bear  in  mind  the  purpose  of  the  note,  and  of 
the  law  in  relation  to  it.  This  is  simply  that  the  note  may  repre- 
sent money,  and  do  all  the  work  of  money  in  business  transactions. 
For  this  purpose  the  first  requisite  —  that  thing  which  includes  all 
the  rest  —  is  certainty."  Certainty,  says  the  author,  as  to  the  per- 
son who  shall  receive  the  money,  the  person  or  persons  who  are  to 
make  the  payment;  the  amount  to  be  paid,  and  the  time  when  pay- 
ment is  to  be  made.  In  Story  on  Promissory  Notes  (§  35),  it  is 
said:  "  In  instruments  designed  for  circulation,  it  is  of  the  highest 
importance  to  know  to  whom  its  obligations  apply,  and  from  whom 
a  title  can  securely  be  derived."  In  Smith  v.  Alarland,  (59  Iowa, 
645,  649),  it  IS  said:  "  The  qualities  essential  to  a  negotiable  prom- 
issory note  are  that  it  shall  possess  certainty  as  to  the  payor,  the 
payee,  the  amount,  the  time  of  payment,  and  the  place  of  payment." 
Such  is  the  rule  uniformly  laid  down  in  all  the  authorities,  and  it 
docs  not  require  further  citations.  This  case  must  not  be  con- 
founded with   notes  payable  in  the  alternative,  as  "  to  A.  or  B. ;  " 


IV.]  PAYABLE    TO    ORDER    OR    TO    BEARER.  2$/ 

it  is  a  promise  to  pay  to  Charles  R.  Whitesell  and  others  jointly. 
Neither  must  it  be  confounded  with  notes  payable  to  bearer,  without 
naming  any  payee,  nor  with  the  cases  in  which  it  has  been  held  that 
whoever  legally  owns  such  a  note  may  recover  thereon.  These 
notes  being  promises  to  pay  Charles  R.  Whitesell  and  others  jointly, 
Whitesell  could  not  alone  transfer  them  so  as  to  convey  the  interest 
of  the  other  payees  any  more  than  if  they  had  been  named  in  the 
notes.  A  note  made  to  several  persons  not  partners  can  only  be 
transferred  by  the  joint  action  of  all  of  them.  [Ryhiner  v.  Feickert, 
92  111.  305);  "  and  neither  payee  can,  of  course,  indorse  the  names  of 
the  others  without  special  authority."  (Randolph  on  Commercial 
Paper,  §  155.) 

The  appellee  contends  that  these  notes  are  in  accord  with  the 
provision  of  section  2085  of  the  Code.  Turning  to  section  2082, 
we  see  that  notes  in  writing,  signed  by  the  person  promising  "  to 
pay  to  another  person  or  his  order  or  bearer,  or  to  bearer  only,  any 
sum  of  money,  are  negotiable  by  indorsement  or  delivery.  It  will 
be  observed  that  the  promise  must  be  to  another  person  or  his  order 
or  bearer,  and  does  not  dispense  with  the  certainty  of  which  we 
have  been  speaking  as  to  who  that  other  person  is.  Section  2085 
is  as  follows:  "  Instruments  by  which  the  maker  promises  to  pay 
a  sum  of  money  in  property  or  labor,  or  to  pay  or  deliver  property 
or  labor,  or  acknowledges  property  or  labor  or  money  to  be  due 
to  another,  are  negotiable  instruments,  with  all  the  incidents  of 
negotiability,  whenever  it  is  manifest  from  their  terms  that  such 
was  the  intent  of  the  maker;  but  the  use  of  the  technical  words 
'order'  or  'bearer'  alone  will  not  manifest  such  intent."  Here, 
again,  the  promise  must  be  to  another,  and  there  is  nothing  in  the 
section  to  modify  the  rule  requiring  certainty  as  to  who  that  other 
is.  It  is  true,  as  contended,  that  negotiable  instruments  may  be 
transferred  by  indorsement  or  delivery;  but  that  does  not  aid  us  in 
determining  whether  these  particular  instruments  are  negotiable. 
It  is  said  that  Charles  R.  Whitesell  is  the  only  payee  named.  That 
is  true,  but  the  notes  show  that  he  is  not  the  only  person  to  whom 
payment  is  to  be  made.  If  it  be  true,  as  alleged  in  the  answer,  that 
the  other  persons  named,  together  with  Charles  R.,  are  in  fact 
payees  of  the  notes,  then,  surely,  Charles  R.  is  not  the  only  payee, 
and  could  not  alone  transfer  them.  Authorities  are  cited  in  support 
of  the  claim  that,  if  any  words  are  used  which  indicate  that  the 
maker  intended  that  the  notes  should  be  negotiable,  the  law  will 
give  effect  to  that  intention,  as  against  him.  It  is  a  sufficient 
answer  to  say  that,  in  view  of  the  law  which  requires  certainty  in 
negotiable   instruments  as  to  who  the   payee   is,  the  fact  that  it  is 

NEGOT.   INSTRUMENTS  —  I7 


258  FORM    REQUIRED.  [ART.  II. 

left   uncertain   rather   indicates   an    intention    that    the   instrument 
should  not  be  negotiable. 

The  appellee  relies  upon  Moore  v.  Anderson,  8  lad.  18.  That  note 
was  payable  to  steamboat  Juda  and  owners,  and  the  court  held  that 
the  word  "owners,"  as  it  occurred  in  the  note,  sufficiently  indi- 
cated a  person,  within  the  intent  of  the  law.  It  is  a  familiar  rule 
that,  when  a  person  is  designated  as  payee,  and  a  question  arises  as 
to  who  of  several  persons  bearing  the  same  designation  was  meant, 
evidence  is  admissible  to  show  which  is  the  payee.  {Parsons  on 
Mercantile  Law,  88.)  Under  this  rule  it  was  admissible  to  show 
who  was  the  owner  of  the  steamboat,  and  hence  the  designation 
was  sufficient.  In  Grant  v.  Vaughan  (3  Burrows,  15 16),  it  is  held 
that  a  note  payable  "to  ship  Fortune  or  bearer  is  negotiable, 
under  the  rule  that,  if  the  name  of  payee  be  not  the  name  of  a  per- 
son, as  if  it  be  the  name  of  a  ship,  the  instrument  is  payable  to 
bearer."  (See,  also,  Parsons  on  Mercantile  Law,  89.)  In  each  of 
these  cases  a  person  was  designated  as  payee, —  in  the  one  as  the 
owner  of  the  steamboat  Juda;  and  in  the  other  as  bearer.  These 
notes  are  payable  to  Charles  R.  Whitesell  and  others  or  order.  The 
others  are  not  designated  by  name  or  otherwise,  and,  therefore,  it 
is  uncertain  "as  to  the  persons  who  shall  receive  the  money," 
uncertain  "  to  whom  its  obligations  apply,  and  from  whom  a  title 
can  securely  be  derived." 

We  think  the  District  Court  erred  in  sustaining  the  demurrer  to 
the  answer. 

Reversed. 

(^)  Payee  may  he  (5)  one  or  some  of  several  payees. 

§  27  MUSSELMAN  v.  OAKES.  [§  8] 

ig  Illinois,  81. — 1857. 
Demurrer  to  declaration  overruled,  and  judgment  for  plaintiff. 

Caton,  C.  J.  The  declaration  in  this  case  was  upon  an  instru- 
ment purporting  to  be  a  promissory  note,  payable  to  "  Olive 
Fletcher  or  R.  H.  Oakes,"  in  an  action  brought  by  Oakes.  The 
declaration  was  demurred  to,  the  demurrer  overruled,  and  judgment 
rendered  in  favor  of  the  plaintiff  below.  This  was  erroneous.  The 
instrument  sued  on  was  payable  in  the  alternative  to  one  of  two  per- 
sons, and  for  that  reason  is  not  a  promissory  note,  and  could  not  be 
sued  on  as  such.  It  is  indispensable  to  a  promissory  note  that  it 
not  only  must  be  for  a  sum  certain,  and  payable  at  a  certain  time, 
and  without  condition,  but  it  must  also  be  payable  to  a  certain  per- 


IV.]  PAYABLE   TO    ORDER   OR   TO    BEARER.  259 

son,  either  specified  on  the  face  of  the  note,  or  who  may  be  certainly 
identified  by  extrinsic  proof,  not  inconsistent  with  the  face  of  the 
note,  as  the  assignee  or  bearer.  Here  the  promise  was  to  pay 
Fletcher  or  Oakes,  but  which,  is  uncertain;  which  of  them  had  the 
right  to  receive  the  pay  is  not  specified,  and  the  legal  right  to  the 
money  is  not  vested  in  either.  But  this  is  a  question  of  law  too 
well  settled  by  the  books  to  require  discussion,  and  I  will  only  refer 
to  Story  on  Prom.  Notes  (p.  40).  The  peculiarity  of  the  note  sued 
on  was  no  doubt  overlooked  by  the  Circuit  Court. 

The  judgment  must  be  reversed. 

Judgment  reversed.' 


§  27     WATSON,   SOUTHERN  AND  MAYER  v.  EVANS.     [§  8] 

I   HURLSTONE  &  COLTMAN  (EXCH.)  662.  —  1S63. 

Declaration.  That  the  defendant  and  William  Patrick  Evans  and 
George  Thomas  Evans,  on,  etc.,  made  their  joint  and  several  prom- 
issory note  in  the  words,  letters,  and  figures,  following,  and  as  fol- 
lows, that  is  to  say: — 

£100.  Leamington,  Dec  2d,  1858. 

On  demand,  we  jointly  and  severally  promise  to  pay  Messrs.  Joseph  Watson, 

Thomas  Southern,  and   Daniel   Mayer,  or  to  their  order,  or  the  major  part  of 

them,    the    sum    of    one    hundred    pounds,    with    lawful    interest,    for    value 

received. 

George  Evans. 

William  Patrick  Evans. 

George  Thomas  Evans. 

That  the  said  makers,  by  the  said  names  following  in  the  said  note 
contained,  that  is  to  say,  Joseph  Watson,  Thomas  Southern,  and 
Daniel  Mayer,  meant  the  plaintiffs;  but  the  defendant  and  the  said 
other  makers  did  not,  nor  did  either  of  them,  pay  the  said  note. 

Demurrer,  and  joinder  therein. 

Hayes  Serjt.  {C.  E.  Coleridge  with  him),  in  support  of  the 
dennurrer.  The  document  is  void  for'uncertainty.  Is  the  money  to 
be  paid  to  the  three  payees,  or  any  two  of  them?  Again,  do  the 
■words  "  or  the  major  part  of  them  "  refer  to  the  payment  or  the 
indorsement,  or  to  both?     [Pollock,  C.  B.  —  Is  it  not  a  promise  to 

'Accord:  Osgood  v.  Pearsons,  4  Gray  (Mass.),  455;  Walrad  v.  Pctrie,  4  Wend. 
(N.  Y.),  575;  Blanckenhagen  v.  Blundell  2  B.  &  Aid.  417.  Query:  does  the  Neg. 
Inst.  L.,  g  27,  subsec.  5.  change  the  law  on  this  point?  See  the  doubt  as  to  its 
correctness  in  Walrad  v.  Peirie,  4  Wend.  575,  576;  and  in  Davis  v.  Garr,  6  N.  Y. 
124,  12,2,  post,  p.  261. —  Ed. 


26o  FORM    REQUIRED,  [ART.  II. 

pay  to  the  three  persons  or  their  order,  or  the  order  of  the  major 
part  of  them?]  Suppose  two  of  them  said  "  pay  to  us;  "  and  the 
other  said  "  pay  all  three."  If  two  alone  sued,  could  the  maker 
plead  in  abatement  the  non-joinder  of  the  third?  Assuming  that  the 
promise  is  to  pay  all  three  provided  they  agree,  if  not  to  pay  any 
two  of  them,  suppose  they  all  disagree,  and  each  says,  "  Do  not  pay  to 
the  other."  [Martin,  B.  —  Payment  to  one  of  several  joint  credit- 
ors is  a  payment  to  all.  |  The  general  rule  of  law  is  qualified  by  the 
express  words  of  the  contract.  In  Bayley  on  Bills,  (p.  34,  5th  ed.), 
ii  is  laid  down  that  "  uncertainty  as  to  the  person  to  whom  the  pay- 
ment shall  be  made  will  prevent  the  document  from  being  a  bill  or 
note;  as  making  it  payable  to  A.  or  B."  The  authority  there  cited 
is  Blanckenhagen  v.  Blundell,  (2  B.  &  Aid.  417),  where  Abbott,  C.  J., 
and  Holroyd,  J.,  agreed  that  such  a  document  cannot  be  a  promis- 
sory note  within  the  statute  3  and  4  Anne,  c.  9,  the  promise  being 
conditional,  to  pay  A.  only  if  the  maker  had  not  paid  B.  [Martin,  B. 
—  Here  the  three  payers  are  suing,  which  distinguishes  the  case 
from  BlanckenJiagen  v.  Blundell.  \  Who  is  to  indorse  the  notes,  the 
three  or  any  two  of  them?  [Martin,  B.  — The  words  "  or  to  their 
order,  or  the  major  part  of  them,"  mean  the  order  of  all  three  or  of 
any  two  of  them.  The  words  "  or  the  major  part  of  them,"  must 
refer  to  the  last  antecedent  order.  Wilde,  B.  — It  is  "I  promise 
to  pay  to  all  three  or  their  order,  but  I  allow  any  two  to  sign  for 
them  all."]  If  the  indorsement  may  be  made  by  the  three,  or  any 
two  of  them,  Blanckenhagen  v.  Blutideil  is  an  authority  that  the 
document  is  not  a  promissory  note  within  the  statute  3  and  4  Anne, 
c.  9.  [Martin,  B.  —  There  cannot  be  any  doubt  in  this  case,  as  the 
three  payees  are  suing.  In  the  Author's  Life,  prefixed  to  the  9th 
edition  of  Noy's  Maxims  by  Bythewood,  p.  viii.,  the  following  anec- 
dote is  related:  "  Three  glaziers  at  a  fair  left  their  money  with  their 
hostess  while  they  went  to  market;  one  of  them  returned,  received 
the  money  and  absconded ;  the  other  two  sued  the  woman  for  deliv- 
ering what  she  received  from  the  three  before  they  all  came  to 
-.-demand-it  together.  The  cause  was  clearly  against  the  woman,  and 
■judgment  was  ready  to  be  pronounced,  when  Mr.  Noy,  pot  being 
employed  in  the  cause^,  desired  the  woman  to  give  him  a  fee,  as  he 
■  could  not  plead  in  her  Vel^^U  ,uii less  he  was  employed';.  and,jhaving 
received  it,  he  moved  in  arrest  of  judgment  that  he  was'-retained  by 
the  defendant,  and -that  ^he  case  was  this:  the  defendant  had 
received  the  money  from  the  three  togetlisr,-,aiKl  w'as  not ^9  deLi-Y^> 
it  until  the  same  three  demanded  it ;  that  the  m'oney  was  ready  to 
be  paid  whenever  the  three  should  demand  it  together.  '  This 
motion  altered  the  whole  proceedings."] 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  26 1 

Mellish  appeared  for  the  plaintiffs,  but  was  not    called    upon  to 
argue. 

Per  Curiam.     There  must  be  judgment  for  the  plaintiffs. 

Judgment  for  the  plaintiffs. 


§  27  [8].  NoxoN  V.  Smith,  127  Mass.  4S5 —  1879.  Soule,  J 
The  instrument  sued  on  is  properly  described  as  a  promissory  note. 
Though  it  purports  to  be  payable  to  "  the  trustees  of  the  Methodist 
Episcopal  Church  or  their  collector,"  the  payee  is  not  therefore 
uncertain,  and  the  instrument  does  not  come  within  the  class  of 
cases  in  which  instruments  otherwise  in  the  form  of  promissory 
notes  are  held  not  to  be  promissory  notes  because  made  payable  in 
the  alternative  to  either  of  two  persons  named.  [Osgood  \ .  Pear- 
sons, 4  Gray,  455.)  That  rule  applies  to  cases  in  which,  so  far  as 
the  instrument  shows,  the  two  persons  named  as  alternative  payees 
are  strangers  to  each  other.  It  does  not  apply  when  the  instrument 
discloses  the  fact  that  one  of  the  two  persons  named  is  named  as 
agent  for  the  other  to  receive  the  money.  {Holmes  v.  yaqiies,  L.  R. 
I  Q.  B.  376.)  In  the  case  at  bar,  it  is  evident  that  "their  collector" 
is  merely  a  person  authorized  by  the  payee  to  receive  the  money  in 
its  behalf.' 


{b')  Payee  may  he  (6)  the  holder  of  an  office  for  the  time  being. 

§  27  ^  DAVIS  V.  GARR.  [§  8] 

6  New  York,  124. — 1S51. 

Action  on  promissory  notes  payable  to  'Joseph  M.  White, 
Charles  A.  Davis,  and  Louis  McLane,  trustees  of  the  Apalachicola 
Land  Company,  or  their  successors  in  office,  or  order."  Judgment 
for  plaintiffs. 

Gardiner,  J.  The  first  objection  presented  by  the  pleadings  on 
the  part  of  the  defendants  is,  that  the  written  instruments  set  forth 
in  the  declaration  are  payable  to  the  trustees  therein  named  or  their 
successors  in  office,  and  that  the  uncertainty  as  to  which  of  the  two 

'  A  note  payable  "  to  M.  K.  or  heirs,"  is  sufficiently  definite  as  to  the  payee. 
Knii^/tt  V.  Jones,  21  Mich.  161.  But  not  one  payable  "  to  C.  W.  et  at."  Gordon 
V.  Anderson,  83  la.  224;  ante,  p.  255.  —  Ed. 


262  FORM    REQUIRED.  [ART.   II. 

the  payment  is  to  be  made  invalidates  them  as  promissory  notes, 
though  not  as  agreements. 

I  am  unable  to  perceive  any  such  contingency  in  the  contracts. 
If  the  plaintiffs  are  to  be  considered  as  the  representatives  of  a  cor- 
poration, and  the  suit  instituted  for  the  benefit  of  their  principal, 
the  payment  must  be  made  to  them,  as  trustees.  If  their  term  of 
office  expired  before  the  commencement  of  the  suit,  then,  and  in 
that  event  only,  would  a  right  of  action  enure  to  their  successors. 
There  never  was  a  time,  consequently,  when  the  maker  of  the  notes 
could  discharge  himself  by  a  payment  made  at  his  election,  to  these 
plaintiffs,  or  their  successors. 

The  term  successors,  implies  one  who  takes  a  place  that  another 
has  left. 

It  might  be  as  reasonably  contended,  that  the  payee  was  contin- 
gent, where  a  note  was  made  payable  to  A.  or  his  executors,  or 
administrators,  etc. 

It  has  been  determined  that  an  undertaking  to  pay  C.  or  D.,  or  his 
or  their  order,  is  not  a  promissory  note,  because  payable  to  either  of 
the  payees,  and  that  only  on  the  contingency  of  its  nut  being  paid 
to  the  other.  {Story  on  Prom.  Notes,  §  37;  4  Wend.  575;  2  B. 
&  Aid.  417.)  The  distinction  between  those  cases  (even  if  the  doc- 
trine thereby  established  is  sound)  and  the  present,  is,  that  the  con- 
tingency in  them  was  apparent  on  the  face  of  the  instrument.  Here 
there  was  no  uncertainty  in  the  contract,  when  the  notes  were 
made,  or  became  payable;  the  ambiguity,  if  any,  would  arise  from 
a  change  of  trustees  after  the  note  took  effect  as  a  perfected 
contract. 

Secondly.  If  the  plaintiffs  were  not  the  representatives  of  a  cor- 
poration, as  the  defendant  insists,  they  could  sustain  the  action  in 
their  own  name;  the  word  "trustees,"  would  be  merely  a  designa- 
tion of  the  persons,  and  the  phrase  "their  successors,"  may  be 
rejected  as  surplusage.  It  has  been  decided  that  a  note  payable  to 
a  trustee,  or  agent,  or  e.xecutor,  will  maintain  a  suit  in  the  name  of 
the  person  mentioned.  (3  Harrington,  385;  3  Mass.  R.  103;  2  Eng. 
[Ark.]  R.  382.  And  see  9  John.  334;  8  Cowen,  31,  and  cases  there 
cited.)  I  think,  therefore,  that  these  contracts  are  promissory  notes, 
and  consequently  negotiable. 

A  majority  of  the  court  concurred  in  the  foregoing  opinion. 

Foot,  J.,  dissented,  on  the  ground  that  the  instruments  declared 
upon  were  not  promissory  notes,  there  being  a  contingency  as  to 
the  persons  to  whom  payment  was  to  be  made. 

Judgment  affirmed. 


IV.]  PAYABLE   TO   ORDER   OR   TO    BEARER.  263 

2.   Payable  to  Bearer. 
[a)  Payable  to  person  named  or  bearer. 

§28  PUTNAM  ?'.  CRYMES.  [§9] 

I  McMullan's  Law  (S.  C.)  9. — 1S40. 

The  plaintiff  in  this  case  was  not  the  original  payee,  but  held  the 
note  by  transfer  to  himself  by  delivery.  The  note  was  made  pay- 
able to  Mancil  Owens  or  holder;  the  plaintiff  declared  as  holder,  and 
defendants  demurred  on  the  ground  that  the  holder  could  not 
sue  without  a  written  assignment.  I  regarded //M/dv  as  synonymous 
wuth  bearer  and  overruled  the  demurrer.  Appeal  by  defendants  on 
the  ground  that  the  demurrer  should  have  been  sustained. 

C«r/a, /^r  Butler,  J.  The  word  bearer  is  usually  inserted  in  a 
negotiable  note,  transferable  by  delivery.  But  without  it,  the  maker 
of  a  note  may  make  it  transferable  by  delivery,  either  by  circumlo- 
cution, or  using  a  word  of  precisely  the  same  import.  As  if  a 
note  were  made  payable  to  A.  B.  or  to  any  one  to  whom  he  may 
deliver  it;  or  to  any  one  who  might  hold  the  same  by  delivery. 
In  both  cases  the  bearer  w'ould  be  sufficiently  meant  and  desig- 
nated, although  the  word  was  not  used.  If  it  was  the  intention 
of  the  maker  to  make  it  payable  to  any  one  who  acquires  pos- 
session by  delivery,  he  has  no  right  to  complain  when  it  is  pre- 
sented to  him  without  a  written  transfer.  Holder  is  a  word  of  the 
same  import  as  bearer,  and  both  may  acquire  a  title  by  lawful  deliv- 
ery, according  to  the  terms  of  the  contract.  All  the  law  requires  is, 
that  the  paper  m.ust  have  negotiable  words  on  its  face,  showing  it 
to  be  the  intention  to  give  it  a  transferable  quality  by  delivery; 
otherwise  the  instrument  must  be  transferred  by  written  indorse- 
ment, if  payable  to  order;  or  sued  on  by  the  original  payee,  if  there 
are  no  negotiable  words  at  all. 

The  decision  below  is  affirmed;  the  whole  court  concurring.' 


{b)  Payable  to  order  of  fietitious  person. 

§  28  ARMSTRONG  v.  NATIONAL  BANK.  [§  9] 

46  Ohio  State,  512. — 18S9. 

Action  by  plaintiff  to  recover  $450  due  her  on  a  deposit.  She 
had  drawn  a  check  on  defendant  bank  payable  to  "  William  Brown," 

'  A  bill  or  note  payable  "  to  bearer,"  or  "  to  A.  or  bearer,"  is  negotiable  by 
delivery  without  indorsement.  Pierce  v.  Crafts,  12  Johns.  (N.  Y.),  90;  Tniesdcll 
V    Thompson,  12  Met.  (Mass.),  565.     See  Neg.  Inst.  L.,  §  60  \j)0\  post.  —  Ed. 


264  FORM    REQUIRED.  [ART.  II. 

who  was  represented  to  her  by  one  Grimes  to  be  an  actual  person, 
and  had  delivered  it  to  Grimes  who  procured  it  by  fraud.  Grimes 
indorsed  on  it  the  name  "William  Brown"  and  defendant,  after  pru- 
dent inquiry  as  to  Grimes'  identity,  paid  it.  "  Willam  Brown"  was 
a  fictitious  person.  Judgment  at  Common  Pleas  for  plaintiff; 
reversed  at  circuit.      Plaintiff  appeals  from  judgment  of  reversal. 

MiNSHALL,  C.  J.  This  case  is  in  its  general  features  analogous 
to  that  of  Dodge  v.  The  National  Exchange  Bank,  (20  Ohio  St.  234), 
and  should,  as  we  think,  be  ruled  by  it.     *     *     * 

The  fact  that  the  check  was  made  payable  to  a  person  that  had 
no  existence  does  not  alter  the  rights  of  the  plaintiff  as  against  the 
bank,  for  she  supposed  that  Brown  was  a  real  person,  and  intended 
that  payment  should  be  made  to  such  person.  The  doctrine  that 
treats  a  check  or  bill  made  payable  to  a  fictitious  person  as  one  made 
payable  to  bearer,  and  so  negotiable  without  indorsement,  applies 
only  where  it  is  so  drawn  with  the  knowledge  of  the  parties. 
{Tatlock  v.  Harris,  3  T.  R.  174,  180;  Vere  v.  Le-wis,  Id.  182; 
Minct  V.  Gibson,  Id.  481;  s.  c,  in  the  House  of  Lords  on  error, 
Gibson  v.  Mi  net,  i  H.  Bl.  569;  Coll  is  v.  Eniett,  1  H.  Bl.  313; 
Gibson  v.  Hunter,  2  H.  Bl.  187.)  The  doctrine  that  a  bill  payable 
to  a  fictitious  person  or  order,  is  equivalent  to  one  payable  to 
bearer,  had  its  origin  in  these  cases,  which  all  grew  out  of  bills 
drawn  by  Levisay  &  Co.,  bankrupts,  payable  to  a  fictitious  person 
or  order,  and  were  accepted  by  Gibson  &  Co. ;  but  it  will  be  noticed 
that  the  holding  in  each  case  was  upon  the  express  ground,  that  the 
acceptor  knew  at  the  time  of  his  acceptance  that  the  bill  was  pay- 
able to  a  fictitious  person;  and  but  for  this  fact  the  fictitious 
indorsement  would  have  been  held  to  be  a  forgery  —  some  of  the 
judges  expressing  a  doubt  whether  it  was  not  so,  although  its  char- 
acter was  known  to  the  acceptor.  (3  T.  R.  181.)  These  cases  will 
be  found  reviewed  in  a  note  to  Bennett  v.  Farrell  {\  Campb.  130). 
It  was  held  in  this  case  that  a  bill  made  payable  to  a  fictitious  per- 
son or  order,  is  neither  payable  to  the  order  of  the  drawer  or  bearer, 
but  is  completely  void.  But  in  an  addendum  to  the  case  (at  page 
180C  of  the  report).  Lord  EUenborough  observes  that  this  holding 
must  be  taken  with  this  qualification:  "unless  it  can  be  shown  that 
the  circumstance  of  the  payee  being  a  fictitious  person  was  known 
to  the  acceptor."  The  rule  with  this  qualification  is  stated  as  the 
law  in  Byles  on  Bills,  73.  (See  also,  to  the  same  effect,  Forbes  v. 
Espy,  21  Ohio  St.  483;  i  Rand.  Com.  Paper,  §§  162,  163,  164; 
2  Parsons  N.  &  B.  591,  and  note  a.)  Mr.  Daniel,  in  his  work  on 
Neg.  Inst.  (sec.  139),  states  the  rule  to  be  general,  but,  as  shown 
by  Mr.  Randolph,  the  cases  do  not  bear  out  the  text,     (i  Rand. 


IV.]  PAYABLE    TO    ORDER    OR    TO    BEARER.  265 

Com.  Paper,  §  164,  note  4.)  And  upon  principle  we  do  not  see 
how  tlie  law  could  be  held  to  be  otherwise.  For  if  the  fictitious 
character  of  the  payee  is  unknown  to  the  drawer,  whoever  indorses 
the  paper  in  that  name  with  intent  to  defraud,  perpetrates  a  forgery 
and  the  indorsement  is  void,  a  general  intent  to  defraud  being  suffi- 
cient to  constitute  the  offense. 

[The  court  here  discusses  and  distinguishes  Lane  v.  Krekle,  22 
Iowa,  399;  Phillips  v.  Im  Thiiru^  18  C.  B.  N.  S.  694;  Rogers  v. 
JVare,  2  Neb.  29;   Orl  v.  Foiuler^  31  Kans.  478.] 

If  the  drawer  of  a  check,  acting  in  good  faith,  makes  it  payable 
to  a  certain  person  or  order,  supposing  there  is  such  person,  when 
in  fact  there  is  none,  no  good  reason  can  be  perceived  why  the 
banker  should  be  excused  if  he  pay  the  check  to  a  fraudulent  holder 
upon  any  less  precautions,  than  if  it  had  been  made  payable  to  a 
real  person;  in  other  words,  why  he  should  not  be  required  to  use 
the  same  precautions  in  the  one  case  as  in  the  other;  that  is,  deter- 
mine whether  the  indorsement  is  a  genuine  one  or  not.  The  fact 
that  the  payee  is  a  non-existing  person  does  not  increase  the  liability 
of  the  bank  to  be  deceived  by  the  indorsement.  The  fact  is  that 
an  ordinarily  prudent  banker  would  be  less  liable  to  be  deceived 
into  a  mistaken  payment  by  a  fictitious  indorsement  such  as  this 
was,  than  by  a  simple  forgery.  The  determination  of  the  character 
of  any  indorsement  involves  the  ascertainment  of  two  things:  (i) 
the  identity  of  the  indorser;  and  (2)  the  genuineness  of  his  signa- 
ture; and  no  careful  banker  would  pay  upon  the  faith  of  the  genu- 
ineness of  any  name,  until  he  had  fully  satisfied  himself  both  as  to 
the  identity  of  the  person  and  the  genuineness  of  his  signature. 
Now,  a  careful  banker  may  be  deceived  as  to  the  signature  of  a  per- 
son with  whose  identity  he  may  be  familiar;  but  he  is  less  liable  to 
be  deceived  where  both  the  signature  and  the  person  whose  signa- 
ture it  purports  to  be,  are  unknown  to  him.  In  making  the  inquiry 
required  in  such  case  to  warrant  him  in  acting,  he  will  either  learn 
that  there  is  no  such  person,  or  that  no  credible  information  can  be 
obtained  as  to  his  existence,  which,  with  an  ordinarily  prudent 
banker,  would  be  the  same  as  actual  knowledge  that  there  is  no 
such  person,  and  he  would  withhold  payment,  as  he  would  have  the 
right  to  do  in  such  case.  But  still,  if  he  should  be  deceived  as  to 
the  existence  of  the  person,  he  would,  nevertheless,  require  to  be 
satisfied  as  to  the  genuineness  of  the  signature.  Of  this,  however, 
he  could  not  be  through  his  skill  in  such  matters  and  on  which 
bankers  ordinarily  rely,  for  he  would  be  without  any  standard  of 
comparison,  and  he  could  have  no  knowledge  of  the  handwriting  of 
the  supposed   person,  for  there  is  no  such  person.     So  that,  if  he 


266  FORM    REQUIRED.  [ART.  II. 

acts  at  all,  it  must  be  upon  the  confidence  he  may  place  in  the 
knowledge  of  some  other  person,  and  if  he  choose  to  act  upon  this, 
and  make,  instead  of  withholding,  payment,  he  acts  at  his  peril  and 
must  sustain  whatever  loss  may  ensue.  It  is  a  saying  frequently 
repeated  in  "  The  Doctor  and  Student,"  that  "  he  who  loveth  peril 
shall  perish  in  it."  In  other  words,  where  a  person  has  a  safe  way 
and  abandons  it  for  one  of  uncertainty,  he  can  blame  no  one  but 
himself  if  he  meets  with  misfortune. 

The  case  of  Vagliano  Brothers  v.  The  Bank  of  England^  recently 
decided  in  England  by  the  Court  of  Appeal,  (23  Q.  B.  D.  243),*  and 
called  to  my  attention  since  the  above  opinion  was  written,  fully 
supports  the  conclusion  we  have  reached. 

Judgment  of  the  Circuit  Court  reversed,  and  that  of  the  Common 
Pleas  affirmed.^ 


§  28  [9]  Clutton  v.  Attenborough,  (1895,  2  Queen's  Bench 
[C.  A.]  707).  A  clerk  laid  before  plaintiff  checks  drawn  to  the 
order  of  "George  Brett,"  a  fictitious  person.  Plaintiff  signed 
them.  The  clerk  indorsed  the  name  "George  Brett"  on  them  and 
defendant  took  them  for  value.  Plaintiff's  bank  having  paid  the 
checks  to  defendant,  plaintiff  seeks  to  recover  the  amount  of  the 
checks  as  money  paid  under  a  mistake  of  fact.  Judgment  for 
defendant.  Lopes,  L.  J.  "The  case  oi  Bank  of  England  \.  Vagli- 
ario  Brothers  (1891  [A.  C]  107),  appears  to  me  to  be  conclusive  of 
the  present  case.     This  case  comes,  in  my  opinion,  within  subsec.  3 

'  Reversed  on  appeal,  1S91,  A.  C.  107.     See  next  note.  —  Ed. 

'^  B.\NK  OF  England  v.  Vagliano  Bros.,  1891,  Appeal  Cases,  107,  {Reversing 
s.  c.  22  Q.  B.  D.  103,  23  Q.  B.  D.  [C.  A.]  243).  V.'s  clerk  forged  bills  with  A.'s 
name  as  drawer,  B.'s  as  payee,  and  V.'s  as  drawee.  A.  and  B.  were  real  per- 
sons. V.  accepted  the  drafts;  the  clerk  forged  B.'s  indorsement  and  procured 
their  payment  at  the  bank.  The  bank  charged  the  bills  to  V.'s  account.  V.,  on 
discovering  the  fraud,  sought  to  compel  the  bank  to  pay  over  to  him  the  sum  of 
^^71,500  charged  against  his  account  on  these  forged  bills.  The  trial  court  and 
the  Court  of  Appeal  held  that  the  plaintiff  could  recover.  The  House  of  Lords 
reversed  the  holding  though  the  law  lords  did  not  agree  as  to  the  reasons.  Lord 
Halsbury,  L.  C,  and  Lords  Watson,  Herschell,  Macnaghten,  and  Morris,  held 
that  the  payee  was  fictitious,  or  non-existent,  within  the  meaning  of  sec.  7, 
subsec.  3,  of  the  Bills  of  Exchange  Act,  and  the  bills  were  therefore  payable  to 
bearer;  and  that  the  acceptor  need  not  know  that  the  payee  is  fictitious.  Lord 
Halsbury,  L.  C,  the  Earl  of  Selborne,  and  Lords  Watson  and  Macnaghten, 
held  the  defendant  tp  be  protected  by  the  conduct  of  the  plaintiff  in  accepting 
the  bills.  Lords  Bramwell  and  Field  dissented  on  the  ground  that  the  payee 
was  not  fictitious  but  real,  and  the  bills  were  not  payable  to  bearer  within  the 
clause  of  the  Bills  of  Exchange  Act.  See  a  part  of  Lord  Herschell's  opinion, 
ante,  p.  127.  —  Ed 


IV.]  PAYABLE   TO    ORDER   OR   TO    BEARER.  267 

of  sec.  7,  of  the  Bills  of  Exchange  Act,  1S82.'  The  counsel  for  the 
plaintiff,  in  their  ingenious  argument,  endeavored  to  import  into 
that  enactment  a  qualification,  namely,  that  the  payee  of  the  bill  or 
check  must  be  a  fictitious  or  non-existing  person  to  the  knowledge  of 
the  drawer.  This  contention  appears  to  me  to  be  entirely  contrary 
to  the  effect  of  the  decision  in  Bank  of  England  v.  Vagliano  Brothers.''' 
(Appeal  dismissed.) 


§  28  [9]  Ship.man  v.  Bank,  (126  New  York,  318  [1891]).  Action 
by  plaintiff  against  the  bank  to  recover  $198,045.50  charged  to  his 
account.  Plaintiff's  clerk  made  out  at  various  times  sixteen  checks 
payable  to  fictitious  persons,  and  eleven  checks  payable  to  real 
persons;  plaintiff  signed  the  checks;  the  clerk  indorsed  the  name  of 
the  payee  upon  the  sixteen  checks  and  forged  the  indorsement  of 
the  payee  upon  the  eleven  checks;  the  checks  were  paid  by  defend- 
ant and  charged  to  plaintiff's  account.  O'Brien,  J.,  (after  holding 
that  the  payments  upon  the  forged  indorsements  were  at  the  peril 
of  the  bank).  It  is  claimed  by  the  defendant  that  the  sixteen 
checks  made  payable  to  the  order  of  persons  having  no  existence 
were,  in  legal  effect,  payable  to  bearer.  It  is  provided  by  statute 
that  paper  made  payable  to  the  order  of  a  fictitious  person  and 
negotiated  by  the  maker  has  the  same  validity  "as  against  the  maker, 
and  all  persons  having  knowledge  of  the  facts,  as  if  payable  to 
bearer."     (i  R.  S.  768,  sec.  5.) 

We  are  of  the  opinion,  upon  examination  of  the  authorities  cited 
by  counsel  on  both  sides,  that  this  rule  applies  only  to  paper  put  in 
circulation  by  the  maker  with  knowledge  that  the  name  of  the  payee 
does  not  represent  a  real  person.  The  maker's  intention  is  the  con- 
trolling consideration  which  determines  the  character  of  such  paper. 
It  cannot  be  treated  as  payable  to  bearer  unless  the  maker  knows 
the  payee  to  be  fictitious  and  actually  intends  to  make  the  paper 
payable  to  a  fictitious  person.  {^Irving  National  Bank  v.  Alley,  79 
N.  Y.  536;  Turnhiill  v.  Bowyer,  40  Id.  456;  Vagliano  v.  Bank  of 
England,  L.  R.  22  Q.  B.  D.  103;  s.  c,  on  appeal,  23  Id.  243; 
Armstrong  v.  Po?neroy  National  Bank,  46  Ohio  St.  512;  7  Railway 
«&:   Corporation    Law   Journal,    114;    Gibson   v.   Alinet,    i   H.   Black. 

569). 

The  findings  of  the  referee  that  the  plaintiffs  in  good  faith  believed 
that  the  names  of  the  payees  represented  real  persons,  entitled   to 

'"Where  the  payee  is  a  fictitious  or  non-existing  person  the  bill  maybe 
treated  as  payable  to  bearer."  Compare  the  Netj.  Inst.  L.,  ^  28  [9],  subsec. 
3-  —  Ed. 


268  FORM    REQUIRED.  [ART.  II. 

receive  from  them  the  amount  of  the  check  in  each  case,  having 
been  led  to  believe  this  by  the  fraudulent  contrivances  of  Bedell, 
and  that  they  intended  that  Bedell  should  deliver  the  check  to  a 
real  payee  therein  named,  and  that  they  did  not  intend  that  they 
should  go  into  circulation  or  be  paid  by  defendant  otherwise  than 
through  a  delivery  to  and  indorsement  by  the  payee  named;  and  that 
plaintiffs  gave  no  authority  to  Bedell  to  indorse  the  name  of  the 
payee,  or  to  put  the  checks  into  circulation,  and  that  no  one  in  fact 
relied  on  any  appearance  of  authority,  derived  from  the  plaintiffs,  in 
Bedell  to  indorse  the  payee's  name  upon  the  checks  or  to  put  them 
in  circulation,  disposes  of  this  question.  The  indorsement  of  the 
names  of  the  fictitious  payees  upon  the  checks,  with  intent  to 
deceive  and  to  put  the  checks  into  circulation,  constituted  the  crime 
of  forgery,  by  means  of  which,  and  without  any  fault  of  the  plain- 
tiffs, payment  was  obtained  thereon.  The  defendant  does  not 
occupy  any  different  position  with  reference  to  the  checks  payable 
to  fictitious  payees  than  it  does  with  reference  to  those  payable  to 
real  parties  whose  indorsements  were  forged. 

Bedell  of  course  knew  that  the  payees  were  fictitious,  but  he  was 
not  acting  within  the  scope  of  his  employment,  but  in  carrying  out 
a  scheme  of  fraud  upon  the  plaintiffs,  and  under  such  circumstances 
his  knowledge  cannot  be  imputed  to  his  principals.  [Frank  v 
Chemical  Nat.  Ba/ik,  supra ;  JK'/sscr  v.  Denison,  supra;  Welsh  v.  Ger- 
man American  Bank,  supra;  Cave  v.  Cave,  L.  R.  15  Cli.  Div.  643, 
644.)' 

{c)    When  the  name  of  the  payee  djcs  not  purport  to  be  the  name  of  any 

person. 

§  28  Mcintosh  v.  lytle.  [§  9] 

26  Minnesota,  336. — 1S80. 
[Reported  herein  at  p.  24S.] 


(</)    When  the  only  or  last  indorsement  is  an  indorsement  in  blank. 

§  28  CURTIS  V.  SPRAGUE.  [§  g] 

51  California,  239. — 1876. 

January  19,  1865,  the  defendant,  Thomas  Sprague,  made,  exe- 
cuted, and  delivered  his  promissory  note  to  the  plaintiff,  Dennis,  in 
the  words  and  figures  following,  to  wit: 

I  See  also  Phillips  v.  Mercantile  N.  B.,  140  N.  Y.  556.  —Ed. 


IV.]  PAYABLE   TO   ORDER   OR   TO    BEARER.  269 

$2400.  January  19,  1865. 

On  the  first  of  November,  proximo,  I  promise  to  pay  to  Thomas  Dennis,  or 
order,  two  thousand  four  hundred  dollars,  for  value  received,  in  United  States 
gold  coin,  with  interest  at  the  rate  of  one  and  one-half  per  cent,  per  month. 

Thomas  Sprague. 

At  the  time  of  the  making  and  delivery  of  the  note,  the  defendant 
Huse  guaranteed  its  payment  by  indorsing  the  same.  When  the 
note  fell  due,  Dennis  failed  to  make  demand  of  payment  and  give 
notice  of  non-payment.  Afterwards,  and  about  the  month  of  Sep- 
tember, 1866,  Huse  made  a  payment  on  the  note,  and  said  to  the 
payee:  "Mr.  Dennis,  I  am  responsible  for  that  note."  Dennis 
after  this  indorsed  the  note  in  blank,  and  delivered  it  to  F. 
Maguire.  Subsequently,  Maguire  assigned  the  note  to  Dennis  by 
indorsement,  without  recourse,  and  redelivered  the  same  to  him. 
Afterwards,  Dennis  delivered  the  note  to  the  plaintiff  Curtis,  with- 
out receiving  any  value,  but  with  an  agreement  that  Curtis  should 
bring  suit  and  divide  with  him  what  he  recovered.  The  plaintiff 
recovered  judgment  and  the  defendants  appealed. 

By  the  Coufi  :  i.  The  statement  made  by  Huse,  the  guarantor,  to 
Dennis,  the  payee,  after  the  maturity  of  the  note,  that  "I  am 
responsible  for  that  note,"  is,  in  substance,  a  promise  to  pay  it.  It 
is  clear  from  the  evidence  that  he  then  had  full  knowledge  of  the 
laches  of  the  holder,  in  failing  to  demand  payment  of  the  maker, 
on  the  day  the  note  matured;  and  it  is  well  settled  that  a  promise 
by  an  indorser  or  guarantor,  after  maturity,  to  pay  the  note,  with 
notice  of  the  laches,  dispenses  with  the  necessity  of  proving  demand 
and  notice.  [Keycs  v.  Fenstertfiaker,  24  Cal.  2>?>?>''<  Sigerson  v.  Mat- 
thews, 20  How.  496.)  The  court  below,  therefore,  properly  held 
that  Huse  was  not  released  by  a  failure  of  the  plaintiff  to  prove 
demand  and  notice.' 

2.  There  was  no  error  in  the  refusal  of  the  court  below  to  non- 
suit the  plaintiff  on  the  motion  of  the  defendants.  When  the  note 
was  delivered  to  Curtis,  it  had  on  the  back  the  blank  indorsement 
of  Dennis,  the  payee;  and  "the  first  effect  of  an  indorsement  in 
blank,  is  to  make  the  paper  payable,  not  to  the  transferee  as 
indorsee,    but   as   bearer."     (2    Parsons    on    Notes    and    Bills,   19.) 

Curtis,  therefore,  acquired  the  legal  title  to  the  note,  with  a  cor- 
responding right  of  action,  when  it  was  delivered  to  him  by  the 
payee,  indorsed  in  blank.  We  attribute  no  importance  to  the  fact 
that  the  note  had  before  been  delivered  by  Dennis  with  the  blank 
indorsement  to  Maguire,  and  that  the  latter  had  redelivered  it  to 
Dennis,  with  a  special  assignment.     The  title  would  have  been  as 

'  See  Neg.  Inst.  L.,  §  142  [82],  180  [109],  post.  —  Ed. 


270  FROM    REQUIRED.  [ART.  II. 

effectually  reinvested  in  Dennis  by  mere  delivery,  without  the 
assignment,  as  with  it;  and  when  Dennis  afterwards  delivered  the 
note  to  Curtis,  there  was  no  need  that  he  should  again  indorse  it  in 
blank,  in  order  to  convey  the  legal  title,  as  the  blank  indorsement 
already  on  it  was  effectual  for  that  purpose. 

3.  The  legal  title  and  right  of  action  being  wholly  in  Curtis,  the 
court  erred  in  permitting  Dennis  to  be  joined  as  a  co-plaintiff.  But 
it  was  an  error  which  has  wrought  no  substantial  injury  to  the 
defendants.  Nevertheless,  in  order  to  preserve  a  proper  consist- 
ency in  the  record,  we  deem  it  better  to  remand  the  cause  for  further 
proceedings. 

It  is  therefore  ordered  that  the  judgment  be  reversed,  and  the 
cause  remanded,  with  an  order  to  the  court  below  to  vacate  the 
order  allowing  Dennis  to  be  joined  as  a  co-plaintiff,  and  to  enter  a 
judgment  in  the  findings  in  favor  of  the  plaintiff  Curtis.' 


V.  Drawee  must  be  certain. 

§  20  WATROUS  z>.  HALBROOK.  [§  l] 

39  Texas,  573-— 1873- 

Ogden,  p.  J.  This  suit  was  brought  by  the  heirs  of  John  S. 
Storrs  against  the  estate  of  D.  E.  Watrous,  on  the  following  instru- 
ment of  writing,  viz.: 

$2771.62  MoNTEVALLO,  /une  I,  1858. 

Ten  months  after  date  pay  to  the  order  of  John  S.  Storrs,  two  thousand  seven 

hundred  and  seventy-one  and  y^jfij  dollars,  value  received,  and  charge  to  account 

of 

D.  E.    Watrous. 

To ,  Mobile,  Ala. 

The  petition  charged  that  for  a  valuable  consideration  from  John 
S.  Storrs  to  him  thereunto  moving,  said  Daniel  E.  Watrous  executed 
and  delivered  to  said  Storrs  the  instrument  of  writing  above  set 
out,  and  that  thereby  said  Watrous  undertook,  and  bound  himself, 
and  became  liable  to  pay  said  sum  therein  specified. 

To  this  petition  the  defendants  filed  a  general  and  special  demurrer, 
which  were  both  overruled  by  the  court,  and  judgment  was  ren- 
dered for  the  plaintiffs,  and  the  defendants  took  their  bills  of 
exception  to  the  ruling  of  the  court,  and  brought  the  case  here  by 
appeal. 

The  only  question  now  presented  for  decision  is,  does  this  instru- 

'Accord:  Middkton  v.  Griffith,  57  N.  J.  L.  442.  —  Ed. 


v.]  DRAWEE    MUST    BE    CERTAIN.  2/1 

ment,  independent  of  any  allegations   of  ownership  for  a  valuable 
consideration,  or  promise  to  pay,  give  the  holder  any  cause  of  action. 

This  instrument  is  not  a  promissory  note  in  its  ordinary  form,  nor 
can  it  be  treated  as  such,  since  there  is  no  promise  to  pay  in  any 
event.  The  instrument  is  directed  to  no  one,  and  therefore  cannot 
be  considered  a  draft  or  bill  of  exchange.  Had  it  been  accepted 
by  any  one,  that  acceptance  would  have  constituted  a  promise  to 
pay  in  the  acceptor,  and  then  the  maker  might  have  become  liable 
as  surety  or  guarantor;  but  as  there  is  no  drawee  or  acceptor,  the 
maker  cannot,  without  allegations  and  proof  of  other  facts  setting 
forth  and  establishing  his  liability,  be  held  responsible.  The  instru- 
ment, with  the  exception  of  the  want  of  a  drawee,  is  in  the  ordinary 
form  of  an  accommodation  bill  or  draft,  on  which  the  maker  cannot 
be  held  liable  until  after  an  acceptance  or  non-acceptance.  We 
think  the  instrument,  as  it  is,  is  an  imperfect  bill  or  draft,  for  the 
payment  of  which  no  one  is  liable.  With  proper  averments,  show- 
ing the  objects  and  purpose  of  the  parties,  and  that  the  maker 
intended  to  bind  himself  in  the  first  instance  to  pay  the  same,  he 
might  possibly  be  held  responsible  without  a  drawee  or  acceptor, 
but  not  otherwise. 

We  can  see  no  material  difference  between  the  writing  here  sued 
on  and  the  one  in  Ball  y.  Alien  (15  Mass.  433),  in  which  the  court 
says:  "But  the  mere  possession  of  a  paper  drawn  in  the  form  of  an 
order,  there  being  no  drawee  in  existence,  we  think  cannot  entitle 
the  possessor  to  an  action  in  any  form." 

The  same  doctrine  may  be  drawn  from  Peto  v.  Reynolds  (9  Exch. 
R.  414)  and  in  Davis  v.  Clark  (4  Eng.  Com.  Law  R.  177).  From 
these  authorities,  and  the  reason  of  law  governing  instruments  of 
this  or  the  like  character,  we  are  clearly  of  the  opinion  that  the 
petition  in  this  case  did  not  set  out  a  good  cause  of  action,  and  that 
the  court  erred  in  overruling  defendant's  special  demurrer  to  the 
same.  We  think  the  demurrer  should  have  been  sustained  and  the 
plaintiffs  permitted  to  amend  their  pleadings,  that,  if  desired,  they 
might,  by  proper  averments  and  proof,  establish  the  liability  of  the 
maker  or  drawer  in  the  first  instance,  without  an  acceptance  or  non- 
acceptance. 

The  judgment  of  the  District  Court  is  reversed  and  the  cause 
remanded. 

Reversed  and  remanded.' 

'  In  Petov.  Reynolds,  (9  Exch.  410),  cited  above,  the  bill  was  not  addressed  to 
any  drawee,  but  across  the  face  was  written:  "Accepted,  Samuel  Reynolds, 
Esq.,  Shorn  Lane,  Bedminster,  Bristol."  One  Righton  (the  drawer  of  the  bill) 
wrote  this  acceptance.     Defendant  denied  Righton's  authority.     There  was  evi- 


272  FORM    REQUIRED.  [ART.  II. 

§  20  [l]  Funk  v.  Babbitt,  156  111.  40S  —  1895.  "B.  Apr.  23, 
1891.  Thirty  days  after  date  pay  to  the  order  of  E.  D.  Babbitt 
$350,  for  value  received.  Funk  &  Lackey."  Mr.  Justice  Baker: 
"  Said  instruments  were  declared  on  as  promissory  notes.  It  is 
urged  that  they  are  not  notes,  or  even  promises  to  pay,  and,  not 
being  directed  to  any  one,  do  not  constitute  drafts  or  orders,  and  in 
fact  amount  to  no  more  than  blank  pieces  of  paper.  They  are, 
undoubtedly,  very  irregular  and  informal  instruments,  but  they  are 
not  void  as  written  evidences  of  indebtedness.  A  person  may  draw 
a  bill  upon  himself,  payable  to  a  third  person,  in  which  case  he  is 
both  drawer  and  drawee.  Here  the  firm  drew  bills,  but  did  not 
address  them  to  any  third  person  or  persons,  and  it  is  therefore  to 
be  regarded  that  they  were,  in  legal  effect,  addressed  to  themselves, 
as  drawees,  and  the  signatures  of  the  firm  to  the  several  bills  bound 
the  firm  both  as  drawers  and  acceptors.  The  instruments  are 
inland  bills  of  exchange,  to  which  the  firm  sustains  the  triple  rela- 
tion of  drawers,  drawees,  and  acceptors,  and  as  the  declaration 
contains  the  consolidated  common  counts,  the  bills  were  admissible 
in  evidence  under  them.  Moreover,  the  drawers  and  drawees  being 
the  same,  the  bills  are,  in  legal  effect,  promissory  notes,  and  may 
be  treated  as  such,  or  as  bills,  at  the  holder's  option,  (i  Daniel  on 
Neg.  Inst.,  §§  128,  129)." 


§  20  [l]  Wheeler  v.  Webster,  i  E.  D.  Smith  (N.  Y.  C.  P.)  i 
(1850).  By  the  Court,  Ingraham,  First  J.  "lam  of  the  opinion 
that  the  omission  of  the  name  of  the  drawee  at  the  foot  of  the  bill 
will  not  vitiate  it.  The  acceptance  may  be  considered  as  supplying 
the  defect,  and  as  being  an  admission  by  the  acceptor,  that  he  is  the 
person  intended.  At  any  rate,  it  does  not  lie  with  him  to  make 
such  defense,  after  having  admitted,  by  the  acceptance,  that  he  was 
the  person  intended,  and  after  having  promised  to  pay  the  draft  at 
maturity.     He  is  estopped,  by  his  own  act,  from  such  a  defense." 

dence  that  defendant  had  orally  promised  to  pay  the  bill,  but  whether  abso- 
lutely or  conditionally  was  not  clear.  Plaintiff  had  a  verdict.  The  court 
held  there  must  be  a  new  trial  because  of  the  unsatisfactory  state  of  the 
evidence.  Three  of  the  four  judges  expressed  the  opinion,  however,  that  the 
instrument  was  not  a  bill  of  exchange  for  the  want  of  a  drawee,  but  might  be 
treated  as  a  promissory  note  if  Reynolds,  in  fact,  ratified  the  signature.  —  Ed. 


v.]  DRAWEE    MUST   BE   CERTAIN.  273 

§  20       ALABAMA  COAL  MINING  CO.  v.  BRAINARD.      [§  i] 

35  Alabama,  476.  —  1S60. 

This  action  was  brought  by  James  M.  Brainard,  against  the 
Alabama  Coal  Mining  Company,  a  domestic  corporation;  and  the 
complaint  was  in  the  following  words: 

"  The  plaintiff  claims  of  the  defendant  $2,200,  due  on  a  bill  of 
exchange,  which  was  drawn  by  one  R.  Swan,  on  the  i6th  November, 
1857,  for  §2,200,  upon  the  defendant,  by  the  name  and  style  of 
'Steamer  C.  IF.  Dorrance  and  owners,'  (the  said  defendant  being 
then  and  there  the  owner  of  said  steamer),  and  accepted  by  said 
defendant,  by  the  name  and  style  of  '  St'r  Dorra?tce,  per  G.  M, 
McConico,  agent,'  (the  said  McConico  being  then  and  there  the 
agent  of  said  defendant,  duly  authorized  to  accept  said  bill  as  afore- 
said), payable  to  W.  B.  Seawell  &  Co.,  on  demand;  which  bill,  after 
maturity,  was  endorsed  to  the  plaintiff,  and,  with  interest,  is  still 
due  and  unpaid." 

A  demurrer  was  interposed  to  the  first  count  of  the  complaint, 
but  was  overruled  by  the  court.  On  the  trial,  as  the  bill  of  excep- 
tions shows,  the  plaintiff  offered  in  evidence  a  bill  of  exchange,  of 
which  the  following  is  a  copy: 

Mobile,  A'ov.  16,  1857. 

Steamer  C.  IV.  Dorrance  and  owners  will  please  pay  W.  B.  Seawell  &  Co. 
twenty-two  hundred  dollars,  and  charge  the  same  to  the  account  of  yours,  etc. 

R.  Swan. 

[Across  the  face]  St'r  Dorrance,  per  G.  M.  McCOMCO,  agent. 

[Indorsed]  Pay  R.  Swan,  or  order,  without  recourse  on  us. 

W.  B.  Seawell. 
Pay  James  M.  Brainard,  or  order.  R.  Swan. 

The  defendant  objected  to  the  reading  of  said  bill  of  exchange, 
with  the  acceptance  thereof,  because  it  was  variant  from  the  bill  of 
exchange  declared  on,  in  that  the  complaint  was  upon  a  bill  accepted 
by  the  defendant,  while  the  bill  offered  was  accepted  by  '  St'r  Dor- 
rance, per  G.  M.  McConico,  agent;'  also,  because  it  was  not  evi- 
dence to  sustain  a  complaint  against  the  defendant  as  acceptor; 
also,  because  there  was  no  proof  of  the  handwriting  of  R.  Swan,  the 
drawer;  also,  because  there  was  no  proof  of  the  authority  of  G.  M. 
McConico  to  make  such  acceptance;  also,  because  said  bill  was 
payable  to  the  order  of  W.  B.  Seawell  &  Co.,  and  had  never  been 
endorsed  by  them.  Each  of  these  objections,  separately  and  sever- 
ally as  made,  was  overruled  by  the  court,  and  the  defendant 
excepted. 

This  being  all  the  evidence,  the  court  charged  the  jury,  that  if 

NEGOT.   INSTRUMENTS —  l3 


274  FORM    REQUIRED.  [ART.  II. 

they  believed  the  evidence,  they  must  find  for  the  plaintiff  to  which 
charge  the  defendant  also  excepted. 

The  overruling  of  the  demurrer  to  the  first  count  in  the  complaint, 
the  admission  of  the  bill  of  exchange  in  evidence,  and  the  charge  of 
the  court  to  the  jury,  are  now  assigned  as  error. 

A.  J.  Walker,  C.  J.  A  bill  of  exchange  may  be  drawn  upon  a  per- 
son, natural  or  artificial,  by  a  name  different  from  the  proper  name 
of  such  person,  and  may  be  accepted  by  a  name  variant  from  the 
proper  name  of  the  acceptor.  (Edwards  on  Bills,  251,  91.)  The 
bill  of  exchange  in  this  case  is  alleged  to  have  been  drawn  upon  the 
defendant,  by  the  name  and  style  of  "  Steamer  C.  W.  Dcvrauce  2in6. 
owners,"  and  to  have  been  accepted  by  the  defendant,  in  and  by  the 
name  and  style  of  "  St'r  Dorrancc^  per  G.  M.  McConico."  The  bill 
of  exchange  given  in  evidence  corresponds,  in  the  name  and  style  of 
its  address  and  acceptance,  with  the  description  alleged;  and,  if 
drawn  upon  the  defendant,  and  by  it  accepted  as  alleged,  was 
admissible  in  evidence. 

§  71  [41]  The  bill  of  exchange  in  this  case  was  drawn  in  favor 
of,  and  payable  to  W.  B.  Seawell  &  Co.  The  phrase  "  &  Co.," 
affixed  to  the  name  "  W.  B.  Seawell,"  \s  prima  facie  evidence  that  the 
bill  of  exchange  was  drawn  in  favor  of  and  payable  to  a  partnership 
of  which  W.  B.  Seawell  was  a  member.  It  was  competent  for  one  of 
the  partners,  if  the  partnership  was  subsisting,  to  endorse  the  bill; 
but  the  legal  title  of  the  partnership  could  only  be  transferred  by  an 
endorsement  in  the  name  of  the  partnership.  (Story  on  Bills,  §  197  , 
Story  on  Part.,  §  602;  Chitty  on  Bills,  56,  57,  225;  Collyer  on  Part., 
§§  401,  402,  474;  Knapp  V.  McBridc  cr'  N'ormafi,  7  Ala.  19;  Lang's 
Heirs  V.  JVaring,  17  Ala.  145.)  It  is  certain,  therefore,  that  the 
endorsement  of  Seawell  alone  would  not  have  the  effect  of  transfer- 
ring to  the  plaintiff's  immediate  endorser  a  legal  title  to  the  bill  of 
exchange;  and  if  it  were  necessary  for  the  plaintiff  to  rely  upon  a 
legal  title  in  this  action,  there  could  be  no  recovery.  But,  notwith- 
standing the  endorsement  by  one  of  the  partners,  in  his  name  alone, 
would  not  carry  to  the  endorsee  the  legal  title  of  the  partnership, 
yet  each  partner  has  the  complete  Jus  dispo7iendi  of  its  choses  in 
action  and  other  personalty,  and  the  transfer  by  one  partner  of  the 
bill  of  the  partnership  must  convey  the  entire  equitable  right  of  the 
partnership,  unless  it  is  assailed  upon  some  adequate  ground. 
(3  Kent's  Comm.,  pp.  44,  45;  -P.  a^  M.  Bank  of  Mobile  v.  Willis  or' 
Co.,  5  Ala.  770.) 

By  virtue  of  such  an  equitable   title,  the  plaintiff  might  maintain 


VI.]  MUST   BE   DELIVERED.  275 

an  action  in  his  own  name,  under  section  2129  of  the  Code.  The 
clause  of  tliat  section  which  does  not  apply  to  bills  of  exchange,  or 
instruments  payable  in  bank,  or  at  a  private  banking  house,  is  that 
which  subjects  the  party  suing  upon  a  contract,  to  any  defense  which 
the  payor,  obligor,  or  debtor,  may  have  had  against  the  payee, 
obligee,  or  creditor,  previous  to  notice  of  the  assignment  or  transfer. 
But  in  this  case,  the  first  count  of  the  complaint  is  upon  an 
endorsement;  and  to  allow  a  recovery  upon  an  equitable  title,  would 
be  violative  of  the  principle  that  the  allegata  zxvA  probata  must  cor- 
respond. The  charge  of  the  court  was,  therefore,  erroneous.  The 
first  count  of  the  complaint  does  not  contain  an  allegation  appropri- 
ate to  a  recovery  upon  the  equitable  title.  [Nesbitt  v.  Pearson,  t^t, 
Ala.  668.)  If  the  bill  could  have  been  admitted  in  evidence  under 
the  common  counts  at  all,  it  could  only  have  been  after  proof  of  its 
execution.     i^May  &^  Bell  v.  Miller  c^  Co.,   27  Ala.  515.) 

Judgment  reversed,  and  cause  remanded. 


VI.  Delivery  essential. 

§  35  HILLSDALE  COLLEGE  r.   THOMAS.  [§  16] 

40  Wisconsin,  661.  —  1S76. 

Action  on  a  promissory  note  signed  by  defendant's  testator  and 
payable  to  plaintiff. 

The  answer  is  to  the  effect  that  one  Parmalee,  an  agent  of  the 
plaintiff,  called  upon  the  defendant's  testator,  and  solicited  him  to 
purchase  a  scholarship  in  the  plaintiff  college,  which  he  at  first 
refused  to  do;  that  finally,  at  the  request  of  Parmalee,  he  signed  the 
note  in  suit,  and  left  it  with  Parmalee,  under  an  agreement  that  the 
latter  should  hold  it  for  the  testator  until  a  certain  time,  to  be 
returned  to  the  testator  in  case  he  should  not  decide  to  purchase 
such  scholarship,  and  in  the  meantime  the  note  should  not  be  con- 
sidered as  delivered  to  the  plaintiff;  and  that  at  the  specified  time, 
the  testator  informed  Parmalee  that  he  had  decided  not  to  purchase 
the  scholarship,  and  demanded  a  return  to  him  of  the  note,  but 
Parmalee,  professing  to  have  sent  the  note  by  mistake  to  the  plain- 
tiff, did  not  comply  with  such  demand. 

On  the  trial,  by  proof  and  the  defendant's  admissions,  plaintiff 
made  a  prima  facie  case.  Defendant  offered  testimony  tending  to 
prove  the  averments  of  the  answer,  but  an  objection  to  its  admission 
was  sustained;  and  the  jurv,  by  direction  of  the  court,  returned  a 
verdict  for  the  plaintiff  for  the  amount  du^  on  the  note  by  its  terms. 
From  a  judgment  entered  on   such  verdict  the  defendant  appealed. 


2/6  FORM    REQUIRED.  [ART.  II. 

Lyon,  J.  The  ruling  of  the  court  rejecting  all  testimony  under 
the  answer  is  equivalent  to  an  order  sustaining  a  general  demurrer 
thereto.  It  is  an  adjudication  that  the  answer  does  not  contain 
facts  sufficient  to  constitute  a  defense  to  the  action.  If  it  states  a 
defense,  the  ruling  is  erroneous  and  fatal  to  the  judgment.  We 
have  no  doubt  whatever  that  the  answer  states  a  complete  defense 
to  the  action,  and  that  the  testimony  offered  to  prove  the  allega- 
tions thereof  should  have  been  received. 

The  note  was  not  left  with  Parmalee,  the  agent  of  the  plaintiff? 
as  an  escrow.  On  the  contrary,  the  defendant's  testator  retained 
the  absolute  control  of  the  note,  and  the  right  to  recall  it  if  he 
chose  to  do  so.  Such  a  deposit  has  none  of  the  essential  features 
of  a  delivery  in  escrow,  and  hence  we  are  not  called  upon  to  deter- 
mine the  legal  effect  of  the  delivery  of  a  note  in  escrow  to  the  agent 
of  the  payee.' 

There  was  no  delivery  of  the  instrument,  and  hence  it  never  had 
an  inception  or  legal  existence  as  the  note  or  obligation  of  the  tes- 
tator. It  remained  mere  waste  paper,  just  as  it  would  have  been 
had  the  testator  kept  it  in  his  pocket  instead  of  leaving  it  with 
Parmalee.  The  fact  that  Parmalee  was  the  agent  of  the  plaintiff  is 
of  no  importance.  Were  the  plaintiff  a  natural  person,  and  had  the 
testator  left  the  note  with  such  person  under  the  same  circum- 
stances, it  would  not  be  a  delivery,  and  would  confer  no  right  of 
action.  Had  the  paper  been  put  in  circulation,  and  were  the  plain- 
tiff a  bona  fide  holder  thereof,  for  value,  before  due,  we  would  or 
might  have  to  determine  whether  or  not  the  testator  had  been  guilty 
of  negligence  in  the  premises.  But  we  have  no  such  question  in  this 
action.  These  views  are  abundantly  sustained  by  the  following 
cases:  Walker  v.  Ebert,  29  Wis.  194;  Kellogg  v.  Stei>ier,  Id.  626; 
Butler  V.  Cams,  37  Id.  61;  Thomas  v.  Watkins,  16  Id.  549;  CJiipman 
V.  Tucker,  38  Id.  43;  Roberts  v.  AIcGrath,  Id.  52;  Roberts  v.  Wood, 
Id.  60. 

Judgment  reversed  and  a  new  trial  awarded.' 

^  While  it  is  now  generally  conceded  that  a  negotiable  instrument  may  be 
delivered  in  escrow  to  a  third  person  for  the  payee,  the  same  as  a  sealed  instru- 
ment, it  is  a  disputed  question  whether  it  may  be  so  delivered  in  escrow 
directly  to  the  payee  or  his  agent.  The  following  cases  hold  that  it  may  not: 
Stewart  v.  Anderson,  59  Ind.  375;  Jones  v.  Shaiv,  67  Mo.  667;  Garner  v.  Fite,  93 
Ala.  405;  Carter  v.  Moulton,  51  Kans.  9.  The  following  cases  hold  that  it  may: 
Burke  V.  Dulaney,  153  U.  S.  228;  Benton  v.  Martin,  52  N.  Y.  570;  IVatkins  v. 
Bowers,  119  Mass.  383;  Brown  v.  St.  Charles,  66  Mich.  71;  Sweet  v.  Stevens,  7 
R.  I.  375.  —  Ed. 

''A  note  signed  by  a  person,  and  found  after  his  death  among  his  papers,  has 
no  validity  for  want  of  delivery.      Purviance  v.  Jones,  120  Ind.  162.  —  Ed. 


VI.]  MUST  BE   DELIVERED.  2/7 

§35  WORTH  V.  CASE.  [§  l6] 

42  New  York   3'' 2.  —  1S70. 

Action  upon  a  promissory  note  for  $10,000.  Judgment  for 
defendants;  reversed  at  General  Term.  Defendants  appeal  and 
stipulate  for  judgment  absolute  for  plaintiff  if  the  judgment  of  the 
General  Term  is  affirmed. 

The  defendant's  testator  handed  to  plaintiff,  his  sister,  a  sealed 
envelope  on  which  was  indorsed  the  following:  "Mary  C.  Worth, 
this  is  not  to  be  unsealed  while  I  live,  and  returned  to  me  at  any 
time  I  may  wish  it;  T.  B.  Worth."  After  the  testator's  death, 
plaintiff  unsealed  the  envelope  and  found  within  it  a  promissory 
note  in  these  words-:  "Addison,  January  30th,  1864.  I  promise  to 
pay  my  sister,  Mary  C.  Worth,  on  demand,  ten  thousand  dollars,  in 
consideration  of  services  rendered  to  me.     T.  B.  Worth." 

Foster,  J.  ...  I  think  there  are  but  two  questions  in  the 
case. 

The  first  is,  whether  the  delivery,  in  the  manner  and  with  the  con- 
ditions specified,  and  under  all  the  circumstances  of  the  case,  was 
such,  that  if  the  note  was  founded  upon  a  sufficient  valuable  consid- 
eration, it  would  on  his  death  constitute  a  valid  and  legal  claim 
against  his  estate;  and  if  so,  then,  second,  was  there  such  a  consider- 
ation expressed,  and  proved  by  parol,  as  would  make  the  note  a 
valid  demand,  if  the  d3livery  had  been  absolute  and  unconditional. 

I  think  the  circumstances  show  that  the  maker  of  the  note  deliv- 
ered it  to  her  with  the  intention  that  it  should  be  hers  absolutely, 
unless  he  should  theTeafter  apply  to  her  for  its  re-delivery,  or  unless 
she  should  open  the  envelope  during  his  life.  Or,  in  other  words, 
that  he  intended  to  pass  the  title  in  it  to  her,  subject  to  being 
divested  (as  she  had  the  possession),  by  either  of  these  acts;  and 
that,  if  neither  of  them  were  performed,  the  title  to  the  note  should 
remain  in  her.  It  was  not  delivered  to  her  as  an  escrow,  for  such  a 
delivery  must  be  made  to  some  third  person;  and,  as  a  general  rule, 
an  escro7ci  is  made  to  await  some  affirmative  action  on  the  part  of  the 
other  party,  before  he  is  entitled  to  the  absolute  delivery  of  the 
instrument,  and  not  the  affirmative  action  of  the  party  who  delivers 
it  as  an  escrow.  The  delivery,  therefore,  was  complete,  provided 
there  was  an  acceptance  by  her. 

There  is  no  doubt,  that  a  delivery  of  a  deed  or  note,  or  (;ther 
obligation,  to  one  person  in  favor  of,  and  for  the  benefit  of  another, 
constitutes  a  valid  and  binding  delivery  as  against  the  party  who 
delivers  it,  whether  the  party  in  whose  favor  it  is  delivered  is  owner 


278  FORM    REQUIRED.  [ART.  II. 

of  it  or  not;  and  for  the  purpose  of  protecting  his  interests,  the  law 
holds  the  party  receiving  the  delivery  as  his  trustee,  and  makes  his 
acceptance  of  it  the  acceptance  of  the  beneficiary.  And  this,  too, 
whether  the  person  receiving  the  delivery  knows  the  contents  of  the 
instrument  or  not,  and  whether  he  does  anything  more  than  merely 
receive  it  or  not.  And  yet,  when  the  person,  in  whose  favor  the 
instrument  is  executed  will  be  injured  by  the  acceptance  of  it,  the 
delivery  to  such  third  person  does  not  bind  ///;//,  unless  he  author- 
ized such  acceptance  or  adopts  it  by  some  subsequent  act. 

The  same  is  the  case  with  an  instrument  executed  and  delivered 
personally  to  an  idiot  or  lunatic.  If  beneficial  to  him,  the  party 
executing  it  is  bound  by  it,  and  the  idiot  or  lunatic  is  entitled  to  its 
benefits;  but  if  against  his  interests,  he  is  not  bound,  although  he 
has  received  the  delivery.  In  these  cases,  the  delivery  is  held  good, 
though  the  grantee  or  obligee  really  had  nothing  to  do  with  the 
transaction,  in  order  to  carry  out  the  intent  of  the  party  who  exe- 
cuted the  instrument,  and  for  the  benefit  of  the  party  for  whose 
benefit  it  was  delivered,  and  constitutes  an  acceptance  on  his  part, 
when  for  his  interest  to  do  so,  and  not  when  otherwise. 

Upon  what  principle  is  it,  then,  that  a  direct  delivery  of  an  obli- 
gation to  the  obligee  himself,  and  a  reception  thereof  by  him,  does 
not  constitute  an  acceptance,  if  the  contents  of  the  instrument 
delivered  are  not  at  the  time  known  to  him? 

And  why  may  not  a  party  deliver  an  instrument,  the  contents  of 
which  are  not  known  to  the  party  receiving  it,  with  the  like  effect  as 
if  it  were,  without  his  knowledge,  delivered  for  his  benefit  to  some 
third  person  for  him? 

Or,  suppose  that  on  the  30th  day  of  January,  1864,  Theron  B. 
Worth  had  been  indebted  to  the  plaintiff  in  the  exact  sum  of  $10,000; 
and  had  on  that  day  delivered  the  note  in  question  precisely  as  he 
did;  and  it  had  remained  in  the  possession  of  the  plaintiff  as  it  did, 
till  his  death;  is  it  possible  that  the  plaintiff  could  not  maintain  an 
action  on  the  )wtc,  and  that  she  would  have  been  compelled  to 
count  on  the  original  indebtedness?  To  my  mind,  the  delivery  and 
acceptance  were  more  complete  than  in  any  of  the  other  cases  to 
which  I  have  alluded.  The  delivery  was  to  the  party  to  be  bene- 
fited; and  from  what  appears -it  is  manifest,  that  when  she  received 
it,  she  considered  it  to  be  something  which  was  of  value  to  her. 
He  had  told  her  that  he  would  pay  her  well  for  the  services  per- 
formed for  him,  and  had  offered  to  buy  her  a  house  and  lot  in  com- 
pensation; and  when  she  received  it,  on  the  day  when  he  left  her  to 
return  to  his  home,  she  could  not  doubt  that  it  contained  the  com- 
pensation, or  the  evidence  of  it,  which  he  had  promised  to  make  to 


VI.]  MUST   BE   DELIVERED.  279 

her;  and  no  doubt  she  gladly  accepted  it  as  such,  in  the  full  belief 
that  it  contained  a  generous  compensation. 

As  nothing  happened  subsequently  to  the  delivery  which  would 
invalidate  the  note,  the  next  question  is,  were  the  conditions  such 
as  to  render  it  void/^r  se. 

By  the  terms  of  the  delivery,  it  was  intended  to  be  valid,  if 
neither  of  two  affirmative  acts  were  afterwards  done.  It  is  clear 
that  neither  of  these  acts  were  performed,  and  in  my  judgment  the 
delivery  and  acceptance  were  sufficient,  and  the  note,  as  such, 
remained  valid  in  the  hands  of  the  plaintiff,  provided  it  was  exe- 
cuted for  a  good  consideration. 

I  think  the  note  was  executed  for  a  valuable  consideration,  and 
that  it  is  valid  against  his  executors. 

The  order  of  the  General  Term  should  be  affirmed,  and  final  judg- 
ment should  be  ordered  for  the  plaintiff  for  the  full  amount  speci- 
fied in  the  note,  with  interest  thereon,  from  the  15th  day  of  October, 
1867  (when  the  claim  of  the  plaintiff  was  made  upon  the  defendant), 
together  with  her  costs  of  the  action  to  be  paid  out  of  the  estate  of 
the  deceased. 

[LoTT,  J.  also  read  for  affirmance,  holding  the  note  invalid  for 
want  of  delivery,  but  available  as  evidence  of  the  value  of  plaintiff's 
services.] 

Earle,  Ch.  J.,  Hunt,  Smith,  and  Ingalls,  JJ.,  were  for  affirm- 
ance and  judgment  absolute  for  the  plaintiff,  concurring  with 
Foster,  J. 

Grover  and  Sutherland,  JJ.,  were  for  reversal. 

Judgment  affirmed,  and  judgment  absolute  ordered  for  the  plaintiff. 


§  35  KINYON  V.  WOHLFORD.  [§  16] 

17  Minnesota,  239.  —  1871. 

Action  on  a  promissory  note,  brought  in  the  District  Court  for 
Steele  county,  resulting  in  a  verdict  for  the  defendant.  Plaintiff 
moved  for  a  new  trial,  which  was  denied,  and  he  appeals  to  this 
court  from  the  order  denying  such  new  trial.  A  single  point  only  is 
discussed  in  the  appeal,  which  is  fully  stated  in  the  opinion. 

By  the  Court — Berry,  J.  This  is  an  action  upon  a  promissory 
note  payable  by  its  terms  to  C.  W.  Stevens,  or  bearer,  and  signed 
by  the  defendant. 

There  was  plenary  evidence  showing  that  the  plaintiff  is  a  bona  fide 
holder  of  the  note,  having  purchased  the  same  before  maturity  in 
good  faith,  without  notice,  and  for  value. 


28o  FORM    REQUIRED.  [ART.  II. 

The  only  defense  urged  here  is  that  there  was  no  delivery  of  the 
note  to  any  person  by  or  on  behalf  of  the  defendant;  that  for  want 
of  delivery  it  is  not  the  note  of  defendant,  and  he  is  not  liable 
thereon  even  to  a  bojia  fide  holder.  '' K  bona  fide  \io\di.t.x  for  value, 
without  notice,  is  entitled  to  recover  upon  any  negotiable  instru- 
ment, which  he  has  received  before  it  has  become  due,  notwith- 
standing any  defect  or  infirmity  in  the  title  of  the  person  from 
whom  he  derived  it;  as,  for  example,  even  though  such  person  may 
have  acquired  it  by  fraud,  or  even  by  theft,  or  by  robbery."  (Story 
on  Prom.  Notes,  §  191;  2  Gr.  Ev.,  §  171;  Stuift  v.  Tyson,  16  Pet. 
I ;  Goodman  v.  Symonds,  20  Howard,  365 ;  Raphael  v.  Bank  of  Eng- 
land,  17  C.  B.  162;  Wheeler  v.  Guild,  20  Pick.  545  ;  Magee  v.  Badger, 
34  N.  Y.  249;  Poiuers  v.  Ball,  27  Vt.  662;  Catlin  v.  Haniofi,  i  Duer, 
325;  Gould  V.  Seger,  5  Duer,  268;  Marston  v.  Allen,  8  Mees.  &  W. 
494;  Sm.  Lea.  Cas.  597  et  seq.;  i  Ross,  Lead.  Cases,  205  et  seq.) 

The  fact  that  there  has  been  no  delivery  of  the  instrument  by  or 
for  the  maker,  or  by  or  for  an  indorser  through  whom  the  holder 
must  claim,  is  a  defect  or  infirmity  of  title  within  the  meaning  of  the 
rule  above  cited,  a  rule  which  is  said  to  be  laid  up  among  the  funda- 
mentals of  the  law.  [JVoreesier  Co.  Bank  w  Doreh.  or'  Afelton  Bk., 
10  Cush.  488;  Edwards  on  Bills  and  Notes,  188;  Gould  v.  Seger, 
supra;  Ingham  v .  Primrose,  7  C.  B.  (N.  S.)  82;  Shippey  v.  Carroll, 
45  111.  285;   Clark  V.  Johnson,  52  111.) 

The  order  denying  a  new  trial  must  be  reversed.' 


§  34  BAXENDALE  v.  BENNETT.  [§  15] 

L.  R.  3  Queen's  Bench  Division  (C.  A.),  525. — 1878. 

Action  on  a  bill  of  exchange  accepted  by  defendant. 

At  the  trial,  before  Lopes,  J.,  without  a  jury,  at  the  Hilary  Sit- 
tings in  Middlesex,  the  following  facts  were  proved:  The  bill, 
dated  the  nth  of  March,  1872,  on  which  the  action  was  brought, 
purported   to   be   drawn   by   one  W.  Cartwright   on   the  defendant, 

'Accord:  Shipley  v.  Carroll,  45  111.  285  (stolen  note);  Clarke  v.  Johnson,  54 
111.  296  (note  forcibly  taken);  Gould  v.  Seger,  5  Duer  (N,  Y.),  268  (note  wrong- 
fully taken);  Cooke  v.  U.  S.,  gi  U.  S.  389;  Worcester  Bank  v.  Dorchester  Bajik, 
ID  Cush.  (Mass.)  488  (bank  notes). 

Contra:  Burson  v.  Huntington,  21  Mich.  415;  Palmer  v.  Poor,  121  Ind.  135; 
Hall  V.    Wilson,  16  Barb.  (N.  Y.)  548. 

Where  negotiable  securities  have  been  paid  and  canceled,  and  are  stolen,  the 
cancellation  marks  erased,  and  the  instruments  negotiated  to  a  bona  fide  holder, 
the  maker  is  not  liable.  District  of  Columbia  v.  Cornell,  130  U.  S.  655.  And  see 
Branch  v.  Commissioners,  80  Va.  427.  —  Ed. 


VI.]  MUST   BE   DELIVERED.  2S1 

payable  to  order  at  three  months'  date.  It  was  indorsed  in  blank 
by  Cartwright,  and  also  by  one  H.  T.  Cameron.  The  plaintiff 
received  the  bill  from  Cameron  on  the  3d  of  June,  1872,  and  was  the 
botia  fide  holder  of  it,  without  notice  of  fraud,  and  for  a  valuable 
consideration. 

One  J.  F.  Holmes  had  asked  the  defendant  for  his  acceptance  to 
an  accommodation  bill,  and  the  defendant  had  written  his  name 
across  a  paper  which  had  an  impressed  bill  stamp  on  it,  and  had 
given  it  to  Holmes  to  fill  in  his  name,  and  then  to  use  it  for  the  pur- 
pose of  raising  money  on  it.  Afterwards  Holmes,  not  requiring 
accommodation,  returned  the  paper  to  the  defendant  in  the  same 
state  in  which  he  had  received  it  from  him.  The  defendant  then 
put  it  into  a  drawer,  which  was  not  locked,  of  his  writing  table  at  his 
chambers,  to  which  his  clerk,  laundress,  and  other  persons  coming 
there  had  access.  He  had  never  authorized  Cartwright  or  any  per- 
son to  fill  up  the  paper  with  a  drawer's  name,  and  he  believed  that  it 
must  have  been  stolen  from  his  chambers. 

On  these  facts  the  learned  judge  found  that  the  bill  was  stolen 
from  the  defendant's  chambers,  and  the  name  of  the  drawer  after- 
wards added  without  the  defendant's  authority ;  but  that  the  defend- 
ant had  so  negligently  dealt  with  the  acceptance  as  to  have  facili- 
tated the  theft;  he  therefore  ruled,  upon  the  authority  of  Young  v. 
Grote,  4  Bing.  253,  and  Ingham  v.  Primrose^  7  C.  B.  (N.  S.)  82,  that 
the  defendant  was  liable,  and  directed  judgment  to  be  entered  for 
the  plaintiff  for  50/  and  costs. 

Bramwell,  L.  J.  I  am  of  opinion  that  this  judgment  cannot  be 
supported.  The  defendant  is  sued  on  a  bill  alleged  to  have  been 
drawn  by  W.  Cartwright  on  and  accepted  by  him.  In  very  truth, 
he  never  accepted  such  a  bill;  and  if  he  is  to  be  held  liable,  it  can 
only  be  on  the  ground  that  he  is  estopped  to  deny  that  he  did  so 
accept  such  a  bill.  Estoppels  are  odious,  and  the  doctrine  should 
never  be  applied  without  a  necessity  for  it.  It  never  can  be  applied 
except  in  cases  where  the  person  against  whom  it  is  used  has  so  con- 
ducted himself,  either  in  what  he  has  said  or  done,  or  failed  to  say 
or  do,  that  he  would,  unless  estopped,  be  saying  something  contrary 
to  his  former  conduct  in  what  he  had  said  or  done,  or  failed  to  say 
or  do.  Is  that  the  case  here?  Let  us  examine  the  facts.  The 
defendant  drew  a  bill  (or  what  would  be  a  bill  had  it  had  a  drawer's 
name),  without  a  drawer's  name,  addressed  to  himself,  and  then 
wrote  what  was  in  terms  an  acceptance  across  it.  In  this  condition, 
it,  not  bemg  a  bill,  was  stolen  from  him,  filled  up  with  a  drawer's 
name,  and  transferred  to  the  plaintiff,  2i  bona  fide  holder  for  value. 
It  may   be   that  no  crime  was  committed   in   the   filling  in   of   the 


282  FORM    REQUIRED.  [ART.  II. 

drawer's  name,  for  the  thief  may  have  taken  it  to  a  person  telHng 
him  it  was  given  by  the  defendant  to  the  thief  with  the  authority 
to  get  it  filled  in  with  a  drawer's  name  by  any  person  he,  the  thief, 
pleased.  This  may  have  been  believed  and  the  drawer's  name  bona 
fide  put  by  such  person.  I  do  not  say  such  person  could  have 
recovered  on  the  bill;  I  am  of  opinion  he  could  not;  but  what  I 
wish  to  point  out  is  that  the  bill  might  be  made  a  complete  instru- 
ment without  the  commission  of  any  crime  in  the  completion.  But 
a  crime  was  committed  in  this  case  by  the  stealing  of  the  document, 
and  without  that  crime  the  bill  could  not  have  been  complete,  and 
no  one  could  have  been  defrauded.  Why  is  not  the  defendant  at 
liberty  to  show  this?  Why  is  he  stopped?  What  has  he  said  or  done 
contrary  to  the  truth,  or  which  should  cause  anyone  to  believe  the 
truth  to  be  other  than  it  is?  Is  it  not  a  rule  that  everyone  has  a 
right  to  suppose  that  a  crime  will  not  be  committed,  and  to  act  on 
that  belief?  Where  is  the  limit  if  the  defendant  is  estopped  here? 
Suppose  he  had  signed  a  blank  cheque,  with  no  payee,  or  date,  or 
amount,  and  it  was  stolen,  would  he  be  liable  or  accountable,  not 
merely  to  his  banker,  the  drawee,  but  to  a  holder?  If  so,  suppose 
there  was  no  stamp  law,  and  a  man  simply  wrote  his  name,  and  the 
paper  was  stolen  from  him,  and  somebody  put  a  form  of  a  cheque  or 
bill  to  the  signature,  would  the  signer  be  liable?  I  cannot  think  so. 
But  what  about  the  authorities?  It  must  be  admitted  that  the  cases 
of  Young  V.  Grotc  (4  Bing.  253),  and  Ingham  v.  Primrose  (7  C.  B. 
N.  S.  82),  go  a  long  way  to  justify  this  judgment;  but  in  all  those 
cases,  and  in  all  others  where  the  alleged  maker  or  acceptor  has 
been  held  liable,  he  has  voluntarily  parted  with  the  instrument;  it 
has  not  been  got  from  him  by  the  commission  of  a  crime.  This, 
undoubtedly,  is  a  distinction,  and  a  real  distinction.  The  defendant 
here  has  not  voluntarily  put  into  any  one's  hands  the  means,  or  part 
of  the  means,  for  committing  a  crime. 

But  it  is  said  that  he  has  done  so  through  negligence.  I  confess 
I  think  he  has  been  negligent;  that  is  to  say,  I  think  if  he  had  had 
this  paper  from  a  third  person,  as  a  bailee  bound  to  keep  it  with 
ordinary  care,  he  would  not  have  done  so.  But  then  this  negligence 
is  not  the  proximate  or  effective  cause  of  the  fraud.  A  crime  was 
necessary  for  its  completion.  Then  the  Bank  of  Ireland  x.  Evans' 
Trustees  (5  H.  L.  C.  389)  shows  under  such  circumstances  there  is 
no  estoppel.  It  is  true  that  was  not  the  case  of  a  negotiable 
instrument;  but  those  who  complained  of  the  negligence  were  the 
parties  immediately  affected  by  the  forged  instrument. 

[Brett,  L.  J-,  agreed  with  the  conclusions  of  Bramwell,  L.  J-,  but 
not  svith    his   reasons,  holding  that   after  the   return   of   the   blank 


VII.]  NOX-ESSEXTIALS.  283 

acceptance    the    defendant    never    authorized    anyone    to    fill    in    a 
drawer's  name,  or  issued  the  acceptance  intending  it  to  be  used.] 

Baggallay,   L.  J.,   concurred    that   the   judgment    ought  to   be 
entered  for  the  defendant. 

Judgment  for  the  defendant. 


VII.  Non-essentials. 

§25  MEHLBERG  z'.  TISHER.  [§  6] 

24  Wisconsin,  607.  —  1S69. 
Action  on  the  following  instrument: 

To  HoxiE  and  Rich:  Please  pay  to  Chas.  Mehlberg  the  sum  of  S69.20,  and 
charge  to  me. 

Chas.  Tisher. 

Dixon,  C.  J.  The  written  instrument  .  .  .  was  a  bill  of 
exchange.  It  is  not  essential  to  the  validity  of  a  bill  of  exchange 
that  it  should  be  made  payable  to  order,  or  bearer,'  or  have  the 
words  "  value  received,"  or  be  payable  at  a  day  certain,  or  at  any 
particular  place. 


§  25  BROWN  V.  JORDHAL.  [§  6] 

32  Minnesota.  135.  —  rS84. 

Plaintiff  brought  this  action  in  the  District  Court  for  Freeborn 
county,  as  holder  of  the  following  instrument: 

Township  of  Manchester,  Fefi'y  23,  18S1. 
S120.  Six  months  after  date,  (or  before,  if   made  out  of   the   sale  of  Drake's 
horse  hay  fork  and  hay  carrier),  I   promise  to  pay  James  B.  Drake,  or  bearer, 
one  hundred  and  twenty  dollars. 

Negotiable  and  payable  at  the  Freeborn  County  Bank,  Albert  Lea,  Minn., 
with  ten  per  cent,  interest  after  maturity  until  paid. 

Ole  J.  Jordahl  [Seal]. 
Witness:  J.  Williamson.  [Seal]. 

At  the  trial,  before  Farmer,  J.,  the  plaintiff,  having  introduced 
evidence  that  he  bought  the  note  from  Williamson  for  value,  before 
maturity,  in  good   faith   and  without   notice   of  any   defense   to  it, 

'  Nor  to  the  validity  of  a  promissory  note  that  it  should  be  payable  to  order  or 
bearer.  Smith  v.  Kettdall,  6  T.  R.  124;  Carjiwrig/it  \.  Gray,  127  N.  Y.  92;  IVflls 
V.  Brigham,  6  Cush.  (Mass.)  6.  Contra:  Bristol  v.  Warner,  19  Conn.  7.  The 
matter  as  to  promissory  notes  is  one  of  construction  of  statute,  as  such  notes 
are  the  creature  of  statute.  See  Neg.  Inst.  L.,  §  320  [184].  It  must  be  remem- 
bered, however,  that  the  Negotiable  Instruments  Law  applies  only  to  negotiable 
paper.  —  Ed. 


284  FORM    REQUIRED.  [ART.  II. 

admitted  that  the  note  was  obtained  from  defendant  by  Williamson 
by  fraud,  and  that  as  between  those  parties  the  note  was  without 
consideration  and  fraudulent.  The  court  thereupon  directed  a  ver- 
dict for  defendant,  a  new  trial  was  denied,  and  the  plaintiff  appealed. 
GiLFiLLAN,  C.  J.  The  defendant  executed  an  instrument  in  the 
form  of  a  negotiable  promissory  note,  except  that  after  and  opposite 
the  signature  were  brackets,  and  between  them  the  word  "seal" 
thus,  "[seal]."  The  question  in  the  case  is,  is  this  a  negotiable 
promissory  note,  so  as  to  be  entitled  to  the  peculiar  privileges  and 
immunities  accorded  to  commercial  paper?  The  rule  that  an  instru- 
ment under  seal,  though  otherwise  in  the  form  of  a  promissory  note, 
is  not  (certainly  when  executed  by  a  natural  person,  however  it  may 
be  when  executed  by  a  corporation)  a  negotiable  note,  entitled  to 
such  privileges  and  immunities,  is  universally  recognized,  and  is  not 
disputed  in  this  state.  But  the  appellant  contends  that  merely 
placing  upon  an  instrument  a  scroll  or  device,  such  as  the  statute 
allows  as  a  substitute  for  a  common-law  seal,  without  any  recogni- 
tion of  it  as  a  seal  in  the  body  of  the  instrument,  does  not  make  it 
a  sealed  instrument.  Undoubtedly,  where  there  is  a  scroll  or  device 
upon  an  instrument,  there  must  be  something  upon  the  instrument 
to  show  that  the  scroll  or  device  was  intended  for  and  used  as  a 
seal.  The  scroll  or  device  does  not  necessarily,  as  does  a  common- 
law  seal,  establish  its  own  character.  Such  words  in  the  tcstimonii/in 
clause  as  "witness  my  hand  and  seal,"  or  "sealed  with  my  seal," 
would  establish  that  the  scroll  or  device  was  used  as  a  seal.  No 
such  reference  in  the  body  of  the  instrument  was  necessary  in  the 
case  of  a  common-law  seal.  (Goddard's  Case,  2  Coke  Rep.  '^a;  7 
Bac.  Abr.  [Bouvier's  ed.]  244.)  Nor  is  there  any  reason  to  require 
it  in  the  case  of  the  statutory  substitute,  if  the  instrument  anywhere 
shows  clearly  that  the  device  was  used  as  and  intended  for  a  seal. 
It  would  be  difficult  to  conceive  how  the  party  could  express  that 
the  device  was  intended  for  a  seal  more  clearly  than  by  the  word 
"seal,"  placed  within  and  made  a  part  of  it.  This  was  an  instru- 
ment under  seal. 

Order  affirmed.' 

'  Accord:  IVarren  v.  Lynch,  5  Johns.  (N.  Y.)  239;  Osborn  v.  Kistler,  35  Oh.  Si. 
99;  Osborne  v.  Hubbard,  20  Ore.  318:  Mtise  v.  Danizler,  85  Ala.  359.  The  stat- 
ute (Neg.  Irst.  L.,  §  25  [6],  subsec.  4),  changes  the  law  upon  this  point. 
Without  the  aid  of  statutes  the  courts  had  decided  that  the  bill  or  note  of  a 
corporation  did  not  lose  its  negotiable  character  because  of  the  presence  of  the 
corporate  seal.  Chase  N,  B.v.  Faurot,  149  N.  Y.  532;  Alason  v.  Frick,  105  Pa. 
St.  162;  Mackay  v.  Saint  Mary's  Church,  15  R.  I.  121;  Central  N.  B.  v.  Char- 
lotte, etc.,  R.,  5  S.  Car.  156.  In  order  to  become  a  common-law  specialty  the 
instrument  must  recite  the  seal  or  otherwise  indicate  the  intention  of  the  maker 
to  create  a  specialty.      Weeks  v.  Esler,  143  N.  Y.  374;  cases  supra. 


VIII.]  DATE.  285 

§  25  CHRYSLER  7k  RENOIS.  [§  6] 

43  New  York,  209.  — 1870. 

[Reported  herein  at  p.  223.] 


§  25  HOGUE  V.  WILLIAMSON.  [§  6] 

85  Texas,  553-  — 1893. 
[Reported  herein  at  p.  225.] 


(ii)  Interpretation. 
VIII.  Date 

§  30  ALMICH  V.    DOWXEY.  [§  n] 

45  Minnesota,  460.  —  1S91. 

Action  on  a  promissory  note  for  $500,  brought  in  the  district  court 
for  Le  Sueur  county.  Trial  before  Edson,  J.,  and  verdict  for  defend- 
ants, who  appeal  from  an  order  granting  a  new  trial. 

Vanderburgh,  J.  Plaintiff  is  the  indorsee  of  the  note  in  suit. 
The  note  was  dated  June  25,  1886,  and  w^as  by  its  terms  payable  six 
months  after  date.  It  is  alleged  in  the  complaint  to  have  been 
executed  and  delivered  on  the  day  of  its  date.  It  appears  from  the 
evidence,  however,  that  the  note  was  actually  executed  and  delivered 
on  the  25th  day  of  June,  1887,  and  that  the  date  was  written  1886, 
by  mistake.  There  was  evidence  to  go  to  the  jury  tending  to  show 
that  it  was  indorsed  to  the  plaintiff  for  value  within  six  months  from 
the  actual  date  of  iti.  delivery,  but  not  within  six  months  or  before 
its  maturity,  according  to  the  face  of  the  note.  The  court  charged 
the  jury,  under  plaintiff's  exception,  that  if  the  note,  when  trans- 
ferred to  plaintiff,  was  due  according  to  the  date  as  actually  expressed 
therein,  and  was  given  without  consideration,  their  verdict  must 
be  for  the  defendants.  If  a  note  is  antedated  or  posi-dated  by  the 
maker,  it  is  a  valid  contract  from  the  time  of  its  delivery;  and,  since 
it  is  competent  to  express  the  agreement  of  the  parties  in  that  way, 
the  courts  will  construe  the  instrument  according  to  its  terms;  and 
if,  when  delivered,  it  is  by  its  date  overdue,  it  will  then  be  treated 
as  a  demand  note,  (i  Pars.,  Notes  and  B.,  p.  49;  3  Rand.,  Com. 
Paper,  §  1034.)  But  where  the  note  is  intended  to  bear  date  as  of 
the   time  of  its  delivery,  that   is  the  true  date;  and  if  by  mistake 


286  INTERPRETATION.  [ART.   II. 

another  date  is  written  on  the  face  of  the  note,  the  mistake  may  be 
corrected,  except  as  to  an  innocent  indorsee  or  purchaser  who 
would  be  prejudiced  by  the  correction,  and  the  mistake  may  be 
shown  by  parol.  (2  Pars.,  Notes  and  B.,  514.)  As  it  clearly 
appeared  that  the  note  was  given  in  1887,  and  the  wrong  year 
inserted  in  the  date  by  mistake,  the  note,  by  intendment  of  law,  was 
payable  in  six  months  from  June  25,  1S87;  and  if  negotiated  and 
indorsed  to  the  plaintiff  before  due,  in  good  faith  and  for  value,  the 
defense  of  want  of  consideration  is  not  available;  and  the  mistake 
may  in  such  case  be  shown  as  well  by  the  indorsee  as  the  payee 
of  the  note.  {Drake  v.  Rogers,  32  Me.  524;  Germatiia  Batik  v. 
Distler,  4  Hun,  633;  affirmed  in  64  N.  Y.  642;  i  Daniel,  Neg.  Inst., 
§  83;   I  Edw.,  Bills  and  N.,  §  171.) 

The  mistake  should  strictly  have  been  alleged  in  the  complaint, 
but  as  the  evidence  was  received  without  objection,  and  the  fact 
was  before  the  court  as  if  properly  pleaded,  and  considered  by  the 
court  in  its  charge,  the  objection  to  the  pleading  cannot  be  raised 
now.  The  pleading  might  have  been  amended  formally  to  conform 
to  the  proofs  after  the  evidence  was  in. 

For  the  reasons  stated,  it  is  apparent  that  the  court  erred  in  its 
charge  on  this  branch  of  the  case,  and  the  order  granting  a  new  trial 
was  proper,  though  based  on  other  grounds.  The  defense  of  want 
of  consideration  was  clearly  shown.  The  note  was  intended  to  offset 
or  reduce  the  amount  of  a  mortgage  held  by  the  defendant  on  the 
land  of  the  deceased  husband  of  the  payee  in  the  note.  It  was  in 
reality  intended  as  a  gift  or  concession,  and,  being  without  con- 
sideration and  incomplete  or  unexecuted,  the  defendant  was  entitled 
to  defend  against  the  note  for  want  of  consideration.  It  did  not 
involve  a  settlement  or  compromise  of  a  doubtful  or  disputed  claim; 
and,  if  this  defense  was  not  shut  out  by  the  transfer  of  the  note  to 
plaintiff  before  due,  she  was  entitled  to  interpose  it. 

Order  affirmed. 


§  31  PASMORE  V.   NORTH.  [§  12] 

13  East(K.  B.)  517.  —  iSii. 

Defendant,  on  May  4th,  drew  a  bill,  dated  May  nth,  and 
delivered  it  to  one  Totty,  the  payee,  who,  on  May  5th  indorsed  it 
for  a  valuable  consideration  to  the  plaintiff,  and  died  on  the  same 
day.  Verdict  for  plaintiff  on  the  bill,  subject  to  the  opinion  of  the 
court. 

Lord  Ellenborough,  C.  J.     The  period  at  which  the  bill  is  pay- 


VIII.]  ■  DATE.  287 

able  appears  in  this  case  by  reference  to  the  actual  date;  and  so  far 
only  it  is  material  to  advert  to  it.  All  that  we  have  of  statutable 
recognition  upon  this  subject  is  against  the  general  materiality  of 
the  date:  For  the  stat.  17  Geo.  3,  c.  30,  requires  (amongst  other 
things)  that  bills  of  exchange  and  promissory  notes,  etc.,  for  sums 
of  20s.  and  less  than  5I.,  "  shall  bear  date  before  or  at  the  time  of 
drawing  or  issuing  the  same,  and  not  on  any  date  subsequent 
thereto;  "  which  implies  that  the  same  regulation  in  not  necessary 
to  be  observed  in  other  bills  for  larger  sums.  Let  us  hear  what 
objection  the  defendant's  counsel  makes  to  this  bill:  Does  he  mean 
to  say  that  it  was  in  abeyance  in  the  immediate  time  between  the 
issuing  of  it  and  the  date. 

Littledale  for  the  defendant.  The  bill  never  had  any  operation  by 
the  custom  of  merchants,  which  does  not  apply  to  an  instrument 
carrying  a  false  appearance  and  deception  upon  the  face  of  it.  It 
was  only  meant  to  be  taken  as  issued  at  the  time  of  the  date,  and 
till  that  day  was  not  a  negotiable  instrument,  however  it  might  bind 
the  drawer  to  answer  for  the  amount  to  the  payee  or  his  executors. 
The  indorsement  then  was  with  reference  to  the  same  time,  and 
could  not  have  had  any  legal  operation  till  then;  but,  before  that 
time  arrived  the  death  of  the  payee  destroyed  the  possibility  of  its 
ever  becoming  a  negotiable  instrument. 

Lord  Ellenborough,  C.  J.  What  deception  does  the  post-dating 
hold  out?  Whoever  takes  the  bill  before  the  day  when  it  bears  date 
must  see  that  it  is  only  payable  at  65  days  after  that  date.  A  bill 
without  any  date  would  still  be  a  good  bill:  Then  why  is  not  this 
as  good?  The  act  to  which  I  have  referred  directs  that  bills  drawn 
for  less  than  5I.  shall  be  made  payable  within  three  weeks  after  the 
date;  which  would  have  been  futile,  without  prohibiting  them  to  be 
post-dated.  The  post-dating  of  drafts  upon  bankers,  unless  drawn 
upon  bill  of  exchange  stamps,  is  by  another  act  prohibited  under  a 
penalty,  and  the  draft  made  void;  and  this  perhaps  may  have  led  to 
the  idea  that  this  bill  was  void,  to  which  the  same  objection  does  not 
apply.  The  time  of  payment  in  this  case  is  certain  with  reference 
to  the  actual  date. 

The  rest  of  the  Court  (Grose,  J.,  absent)  agreed;  Le  Blanc,  J., 
adding,  that  the  very  party  who  now  set  up  the  defense,  that  this 
was  not  a  negotiable  instrument,  was  the  person  who  issued  it  into 
the  world  as  such.  And  they  held  that  the  plaintiff  was  entitled  to 
recover  for  the  whole  amount  of  the  bill;  for  which  he  took  his 
judgment  accordingly.' 

'  Accord:  Brewster  v.  McCardcll,  8  Wend.  (N.  Y.)  478.  As  to  blank  date  see 
the  next  case.  —  Ed. 


288  INTERPRETATION.  [ART.  II. 

IX.  Blanks  :    Authority  to  fill. 

§  32  PAGE  V.   MORREL.  [§  13] 

3  Abbott's  Appeal  Decisions  (N.  Y.)  433.  —  1866. 

Ira  and  Orlando  Page  sued  David  and  Daniel  H.  Morrel,  compos- 
ing the  firm  of  Morrel  &  Son,  and  Benjamin  N.  Nellis,  in  the  Supreme 
Court,  on  a  promissory  note,  of  which  D.  Morrel  &  Son  were  makers, 
and  Nellis  the  indorser. 

The  note  was  made  on  June  10,  1859,  for  the  sum  of  fifty  dollars, 
payable  thirty  days  after  date.     It  was  dated  June,  but  with  a  blank 

where  the  day  of  the  month  is  usually  stated,  thus:      "  June , 

1859." 

In  this  condition  the  note  was  indorsed  by  the  defendant  Nellis 
for  the  accommodation  of  the  makers,  and  on  the  same  day,  the 
tenth,  the  makers  transferred  it  for  value  to  one  Wiles.  On  the 
fifteenth  of  the  month,  Wiles  transferred  the  note  to  the  plaintiffs 
for  value,  and  they,  without  the  knowledge  of  any  of  the  other 
parties  thereto,  and  of  course  without  their  express  consent,  filled 
the  blank  in  the  date  with  the  figure  "  i,"  so  as  to  make  the  date 
"  June  I,  1859." 

The  indorser  having  been  charged,  on  non-payment  thirty  days 
after  June  i,  this  action  was  brought;  and  the  only  question  was, 
whether  the  note  was  valid  against  the  defendants,  notwithstanding 
the  insertion  of  the  figure  in  the  date.  The  judge  found  the  fore- 
going facts,  and  held  that  the  note  was  valid,  and  gave  judgment 
for  the   plaintiffs. 

By  the  Court  —  James  C.  Smith,  J. — The  only  question  in  this 
case  is,  whether,  as  between  these  parties,  the  note  is  rendered 
invalid,  in  consequence  of  its  having  been  antedated  by  the  plain- 
tiffs after  the  transfer  to  them,  so  that  it  had  ten  days  less  to  run 
than  it  would  have  had  if  it  had  been  dated  as  of  the  day  when  it 
was  indorsed  and  negotiated  to  Wiles. 

There  can  be  no  doubt  that,  if  the  same  day  of  the  month  had 
been  inserted  by  the  makers  when  they  negotiated  the  note  to  Wiles, 
without  the  knowledge  of  the  indorser,  the  note  would  not  thereby 
have  been  rendered  invalid,  as  against  the  indorser;  and  so  if  the 
day  had  been  inserted  by  Wiles,  with  the  express  direction  or  con- 
sent of  the  maker.  In  such  case,  the  note,  when  indorsed,  being 
perfect  in  every  respect  but  the  date,  and  that  having  been  left 
blank,  the  makers  would  have  had  an  implied  authority  from  the 
indorser,  to  insert  any  day  of  the  month  they  might  think  proper. 
{Mitchell  w  Culver,  7  Cow.  ■iid;  M.  &=  F.  Bank  v.  Schuyler,  Id.  337, 


IX.]  BLANKS.  289 

note.)  Such  authority  results  from  the  general  rule,  that  an  indorse- 
ment on  a  blank  note,  without  sum,  or  date,  or  time  of  payment, 
will  bind  the  indorser,  for  any  sum,  payable  at  any  time,  which  the 
person,  to  whom  the  indorser  trusts  it,  chooses  to  insert.  The  date 
of  a  note  is  no  exception  to  this  rule,  although  it  is  not  essential  to 
the  validity  of  a  note  that  the  date  be  expressed ;  for,  where  a  note 
has  no  date,  the  time,  if  necessary,  may  be  inquired  into,  and  will 
be  computed  from  the  day  it  was  issued.  But  it  is  essential  to  the 
free  and  uninterrupted  negotiability  of  a  note  that  it  should  be 
dated,  and,  therefore,  all  the  parties  to  a  note  intended  for  circula- 
tion, are  presumed  to  consent  that  a  person,  to  whom  such  a  note  is 
intrusted  for  the  purpose  of  raising  money,  may  fill  up  the  blank 
with  a  date.  [lb.)  And  a  blank,  left  for  the  day  of  the  month,  may 
be  filled  with  any  day  in  that  month,  there  being  no  fraud,  or  express 
direction  to  the  contrary. 

Upon  the  same  principle,  Wiles,  to  whom  the  note  was  delivered 
by  the  makers,  had  an  implied  authority,  from  both  makers  and 
indorsers,  to  fill  the  blank  with  any  day  in  the  month. 

But  it  is  claimed  by  the  defendant's  counsel,  that  the  implied 
authority,  above  stated,  is  restricted  to  the  first  holder  of  a  note,  and 
that  it  was  unlawfully  exercised  by  the  plaintiff,  to  whom  the  note 
was  transferred  in  blank  by  Wiles. 

That  position  cannot  be  maintained.  It  is  immaterial,  to  the 
parties  to  the  note,  whether  the  blank  in  the  date  was  filled  by  the 
first  holder  or  his  transferee.  The  latter  acquired  all  the  rights  of 
the  former  in  regard  to  the  paper.  Until  the  blank  was  filled,  each 
successive  holder  took  the  note  with  authority  to  fill  the  blank, 
according  to  the  implied  intent  of  the  parties.  The  reasoning  of 
Justice  Bockes  upon  this  point,  in  the  court  below,  is  satisfactory  and 
convincing.  The  case  of  Inglish  v.  Bnineman  (5  Ark.  377),  so  far 
as  it  holds  to  the  contrary,  is  not  supported  by  authority. 

The  judgment  should  be  affirmed. 

All  the  judges  concurred,  except  Morgan,  J.,  who  dissented. 

Judgment  affirmed,  with  costs. 


§  33  CAULKINS  V.  WHISLER.  [§  14] 

29  Iowa,  495.  —  1S70. 

Action  upon  a  promissory  note;  defense  that  the  instrument  is  a 
forgery.  The  cause  was  submitted  to  the  court  without  a  jury.  The 
court  found  the  following  facts:     Defendant  entered  into  a  contract 

NEGOT.   INSTRUMENTS  —  Ig. 


290  INTERPRETATION.  [ART.   II. 

with  one  Smith  to  sell  for  him,  as  his  agent,  grain  seeders.  At 
Smith's  request,  defendant  signed  his  name  upon  a  blank  piece  of 
paper,  which  Smith  was  to  send  to  the  manufacturers  of  the  seeders, 
that  they  might  know  defendant's  signature  upon  orders  which  he 
should  make  upon  them  for  the  machines.  The  signature  was  made 
for  no  other  purpose. 

The  instrument  in  suit  was  printed  over  the  signature  of  defend- 
ant, so  obtained,  without  his  knowledge  and  consent,  and  the  stamp 
in  the  same  manner  attached  and  canceled.  The  plaintiff  purchased 
the  note  before  maturity,  for  a  valid  consideration,  and  without 
knowledge  of  any  matter  connected  with  its  execution.  Upon 
these  findings,  the  court  held,  that  the  note  is  a  forgery  and  void, 
and  that  plaintiff  is  not  entitled  to  recover  thereon.  Plaintiff 
appeals. 

Beck,  J. — A  holder  of  negotiable  paper,  acquired  before  dis- 
honor, is  not  protected  against  defenses  that  make  void  the  instru- 
ment. He  can  have  no  claim  upon  forged  paper  against  the  person 
whose  name  is  falsely  affixed  thereto  as  the  maker,  and  who  is  with- 
out fault  as  to  the  forgery  and  the  taking  of  the  paper  by  the  holder. 
(i  Parsons,  Bills  and  Notes,  75,  and  authorities  cited.) 

Is  the  note  sued  upon  a  forged  instrument?  "  The  making  or 
alteration  of  any  writing  with  fraudulent  intent,  whereby  another 
maybe  prejudiced,  is  forgery."  (S/ate  v.  IVooderd,  20  Iowa,  542; 
Rev.,  §  4253.)  In  order  to  constitute  the  offense  of  forgery  it  is 
not  necessary  that  the  signature  of  the  instrument  be  false.  The 
instrument  may  be  altered  so  that  it  is  not  the  instrument  signed  by 
the  maker,  and,  if  this  be  fraudulently  and  falsely  done,  it  is  forgery. 
So  if  words  be  added  to  change  its  effect,  with  like  intent,  it  is  a 
forgery.  In  the  case  before  us  the  instrument  was  falsely  and 
fraudulently  made  over  the  genuine  signature  of  defendant,  which 
was  not  obtained  for  the  purpose  of  binding  defendant  by  any  con- 
tract. It  is  evident  that  this  differs,  in  no  respect,  from  the  cases 
mentioned,  and  that  the  note  is  a  forgery  and  void.  (See  2  Parsons, 
Bills  and  Notes,  584.) 

The  case  differs  materially  in  its  facts  from  the  cases  cited  in  sup- 
port of  plaintiff's  right  to  recover.  In  those  cases  blanks  were  filled 
up  contrary  to  the  direction  of  the  maker,  or  without  his  authority. 
But  in  all  of  such  cases  the  makers  intended  to  execute  an  instru- 
ment that  should  be  binding  upon  them.  Blanks  were  filled  up  con- 
trary to  the  authority  given  by  the  makers,  or  in  some  other  way 
the  instruments  were  made  so  that  they  did  not  correspond  with  the 
intention  of  the  makers;  but  in  all  such  cases  there  were  makers  znd 
instrjiments,  and  through  the   frauds  of  those  to  whom  the  instru- 


IX.]  BLANKS.  291 

ments  were  intrusted  they  were  thus  made  to  be  of  different  effect 
than  was  designed  by  the  malcers.  In  these  cases  it  is  correctly 
held,  that  while  the  parties  perpetrating  the  fraud  in  some  cases 
may  have  been  guilty  of  forgery,  yet  the  makers  were  bound  upon 
the  instruments,  as  against  holders  in  good  faitn  and  for  value.  The 
reason  is  obvious.  The  maker  ought  rather  to  suffer,  on  account 
of  the  fraudulent  act  of  one  to  whom  he  intrusts  his  paper,  or  who 
is  made  his  agent  m  respect  of  it,  than  an  innocent  party.  The  law 
esteems  him  in  fault  in  thus  putting  it  in  the  power  of  another  to 
perpetrate  the  fraud,  and  requires  him  to  bear  the  loss  consequent 
upon  his  negligence.  In  the  case  under  consideration  no  fault  can 
be  imputed  to  the  defendant.  He  did  not  intrust  his  signature  to 
the  possession  of  the  forger  for  the  purpose  of  binding  himself  by 
a  contract.  He  conferred  no  power  upon  the  party  who  committed 
the  crime  to  use  it  for  any  such  purpose.  He  was  not  guilty  of 
negligence  in  thus  giving  it,  for  it  is  not  unusual,  in  order  to  identify 
signatures,  and  for  other  purposes,  for  men  thus  to  make  their  auto- 
graphs. The  defendant  cannot  be  regarded  as  being  so  far  in  fault 
in  the  transaction  that  he  ought  to  be  required  to  bear  the  loss 
resulting  from  the  crime. 

In  our  opinion  the  decision  of  the  circuit  court  is  in  accord  with 

the  law,  and  is  therefore 

Affirmed.' 


§  33  MARKET  AND  FULTON  NATIONAL 

BANK  V.  SARGENT.  [§  14] 

85  Maine,  349.  —  1S93. 

Whitehouse,  J.  — This  was  an  action  on  a  promissory  note  for 
seven  hundred  and  eighty-five  dollars,  brought  by  the  plaintiff  bank 
as  indorsee  of  Earl  B.  Chace  &  Company  against  the  defendant  as 
maker  of  the  note. 

The  defendant  seasonably  filed  his  affidavit  that  the  paper  declared 
on  had  been  materially  altered  since  it  was  executed. 

The  facts  were  not  controverted.  The  defendant  had  signed  a 
prior  note  for  the  accommodation  of  Chace  &  Company  which  was 
outstanding  and  overdue  at  the  time  of  the  signing  of  the  note  in 
question.  At  Chace's  request  he  agreed  to  sign  three  other  accom- 
modation notes  to  take  up  the  overdue  note,  each  to  be  for  one-third 

'  See  Walker  v.  Ebert,  29  Wis.  194,  post;  Chapman  v.  Hose,  56  N.  Y.  137, 
post.  —  Ed. 


292  INTERPRETATION.  [ART.   II. 

of  the  amount.  But  when  the  parties  met  for  the  purpose  of  exe- 
cuting this  agreement,  the  amount  of  the  overdue  note  was  not 
definitely  known  to  either  of  them,  but  was  understood  to  be 
between  six  hundred  dollars  and  six  hundred  and  fifty  dollars- 
Thereupon,  at  Chace's  suggestion,  the  defendant  signed  three 
printed  blank  notes  and  delivered  them  to  Chace,  who  agreed  to  fill 
them  out  with  the  requisite  amount  specified  in  each,  when  ascer- 
tained, and  use  them  for  the  purpose  of  taking  up  the  overdue  note. 
The  note  in  suit  is  one  of  the  three  notes  thus  signed.  But  instead 
of  making  it  for  one-third  of  the  overdue  note  according  to  his 
agreement,  Chace  fraudulently  wrote  in  "  Seven  hundred  and  eighty- 
five  dollars  "  and  indorsed  the  note  to  the  plaintiff  bank  before 
maturity  in  the  ordinary  course  of  business,  receiving  therefor  the 
full  amount  of  the  note  less  fifteen  dollars  and  ninety-six  cents  dis- 
count thereon.  It  is  not  claimed,  however,  that  Chace  made  any 
alteration  in  the  printed  terms  of  the  blank  thus  delivered  to  him. 
He  simply  inserted  in  the  blank  spaces  such  words  and  figures  as 
were  necessary  to  constitute  the  instrument  a  complete  promissory 
note.  There  is  also  positive  testimony  from  the  plaintiff  s  discount 
clerk  that,  at  the  time  the  note  was  discounted,  the  bank  had  no 
knowledge  of  any  equities  existing  between  the  defendant  and  Chace, 
but  took  the  note  in  the  usual  course  of  business.  Upon  this  evi- 
dence the  presiding  justice  directed  the  jury  to  return  a  verdict  for 
the  plaintiff  for  the  amount  of  the  note  in  suit. 

This  instruction  was  correct.  The  court  may  properly  instruct 
the  jury  to  return  a  verdict  for  either  party  when  it  is  apparent  that 
a  contrary  verdict  could  not  be  sustained.  {Heath  v.  Jaqiiith,  68 
Maine,  433;  yeivellyi.  Gag?ie,  82  Maine,  431;  Moore  v.  McKcnney,  Z^ 
Maine,  80.) 

It  is  well  settled  and  familiar  law  that,  if  one  affixes  his  signature 
to  a  printed  blank  for  a  promissory  note  and  intrusts  it  to  the  custody 
of  another  for  the  purpose  of  having  the  blanks  filled  up  and  thus 
becoming  a  party  to  a  negotiable  instrument,  he  thereby  confers  the 
right,  and  such  instrument  carries  on  its  face  an  implied  authority, 
to  fill  up  the  blanks  and  complete  the  contract  at  pleasure,  as  to 
names,  terms  and  amount,  so  far  as  consistent  with  its  printed  words. 
As  to  all  purchasers  for  value  without  notice,  the  person  to  whom  a 
blank  note  is  thus  intrusted  must  be  deemed  the  agent  of  the  signer, 
and  the  act  of  perfecting  the  instrument  is  deemed  the  act  of  the 
principal.  An  oral  agreement  between  such  principal  and  agent 
limiting  the  amount  for  which  the  note  shall  be  perfected,  cannot 
affect  the  rights  of  an  indorsee  who  takes  the  note  before  maturity 
f (  r  value,  in  ignorance  of  such  agreement,  with  a  different  amount 


IX.j  BLANKS. 


293 


written  in  it.  {Bank  of  Pittsburgh  v.  Ncal,  22  Howard,  97;  Angle  v. 
Ins.  Co.,  92  U.  S.  330;  Bank  v.  Stowell,  123  Mass.  196;  Kellogg  v. 
C?^r//>,  65  Maine,  59;  Abbott  y .  Rose,  62  Maine,  194;  Breckenridge  v. 
Lewis,  84  Maine,  349;  Bigelow's  Bills  and  Notes,  571.)' 

§  98  [59]  B'Jt  the  defendant  contends  that  it  is  not  satisfactorily 
shown  by  affirmative  evidence  that  the  bank  was  an  innocent 
purchaser. 

Proof  of  fraud  in  the  inception  of  the  note  undoubtedly  casts  upon 
the  indorsee  the  burden  of  showing  that  he  took  the  note  for  value, 
before  maturity  without  notice  of  the  fraud.  {Farrellv.  Lovett,  68 
Maine,  326;  Kellogg  v.  Curtis,  69  Maine,  213.)  But  proof  that  he 
paid  full  value  for  the  note  before  maturity  raises  a  presumption  that 
he  purchased  it  in  good  faith  without  notice  of  the  fraud;  and  until 
overcome  by  rebutting  evidence  this  presumption  stands  in  lieu  of 
direct  proof.      {Kellogg  v.  Curtis,  supra.) 

The  plaintiff's  testimony  that  the  note  was  discounted  in  the  usual 
course  of  business  before  maturity,  for  its  face  value  less  the  dis- 
co'int  stated,  is  not  controverted.  A  prima  facie  case  is  thus  made 
out  for  the  plaintiff,  without  the  aid  of  the  affirmative  statement  of 
the  discount  clerk  that  the  bank  did  not  know  of  any  equities  between 
the  defendant  and  Chace.  There  is  no  opposing  evidence  to  over- 
come the  presumption  arising  from  the  purchase  of  the  note  before 
maturity  for  full  value,  and  no  evidence  in  the  case  upon  which  a 
verdict  for  the  defendant  could  be  allowed  to  stand. 

Exceptions  overruled. 


§  33  IVES  V.   FARMERS'  BANK.  [§  14] 

2  Allen  (Mass.)  236.  —  1861. 

Writ  of  review  of  a  judgment  in  favor  of  the  Farmers'  Bank,  of 
Bridgeport,  Connecticut,  against  Geo.  R.  Ives,  of  Brooklyn,  New 
York,  upon  the  following  note: 


'  If  a  blank  note  is  entrusted  to  A.  by  B.,  and  A.  fills  the  blanks  but  also  adds 
with  interest,  etc.,"  at  the  end,  there  being  no  blank  space  indicated  for  such 
purpose,  B.  is  not  liable,  since  this  amounts  to  a  material  alteration.  Farmers', 
etc.,  lY.  B.  V.  Novich,  89  Tex.  381;  IVeyerhauser  v.  Dun,  100  N.  Y.  150.  See 
Neg.  Inst.  L.,  §  206  [125]  post.  So,  also,  the  distinction  must  be  clearly  drawn 
between  issuing  an  inst-ument  with  blanks  and  issuing  one  in  which  the  blanks 
have  been  so  imperfectly  filled  as  to  leave  unoccupied  spaces.  In  the  latter 
case  to  fill  the  spaces  would  be  an  alteration  and  would  destroy  the  instrument 
unless  the  maker  were  held  to  be  estopped  by  the  negligent  manner  in  which  he 
sent  the  instrument  into  the  world.     S,^e post.  Art.  IX,  Div.  I.  3,  p.  5^0.  —  V.u. 


294  INTERPRETATION.  [ART.  II. 

$1585.90.  Brooklyn,  Septcnibc?-,  20th,  iSj8. 

Three  months  after  date  /  promise  to  pay  to  the  order  of  Edwin  R.  Yale, 
Dec.  2j,  ft/teen  hundred  and  eighty-Jive  -nnr  dollars  at  Atlantic  Baftk,  N'ew  York, 
value  received. 

Geo.  R.  Ives. 
[Indorsed]:   Edwin  R.   Yale. 

At  the  trial  in  the  superior  court  before  Rockwell,  J.,  the  note 
was  produced,  and  those  portions  of  it  which  are  printed  above  in 
Roman  letters  were  engraved,  and  the  rest,  including  the  figures, 
filled  in  with  a  pen. 

The  note  was  discounted  by  the  Farmers'  Bank  for  Vale  on  the 
12th  of  October,  1858,  and  the  sum  of  $400  of  its  avails  vras  applied 
in  payment  of  an  instalment  then  due  to  them  upon  another  note  of 
Yale;  and  Ives  contended  that,  as  to  this  sum,  the  bank  could  not 
be  considered  as  a  bona  fide  holder  of  the  note  for  value,  but  the 
judge  declined  so  to  rule. 

The  jury  returned  a  verdict  for  the  bank,  for  the  amount  of  the 
note,  deducting  $217,  which  was  claimed  to  have  been  paid  under 
circumstances  stated  in  the  opinion;  and  both  parties  alleged 
exceptions. 

Hoar,  J.,  [after  disposing  of  another  matter].  — The  plaintiff  in 
review  offered  evidence  tending  to  prove  that,  at  the  time  when  he 
signed  the  alleged  note,  he  received  a  note  of  the  said  Yale  for  the 
same  amount,  as  an  accommodation  note,  engaging  to  pay  the  same  at 
maturity;  and  that  he  did  pay  the  same  accordingly.  He  furtner 
offered  to  prove  that,  as  a  memorandum  of  the  transaction,  he  took 
the  printed  blank  form  of  a  note,  and  wrote  the  figures,  "  $1,589.90," 
the  date,  "  Dec.  23,"  in  the  body  of  the  note,  and  signed  his  name 
at  the  bottom,  the  said  Yale  having  written  the  date  "  September 
20th,  1858;  "  that  he  gave  it  to  Yale  in  that  condition  as  a  mem- 
orandum only,  and  upon  the  express  agreement  that  it  should  not  be 
used  as  a  note;  and  that  subsequently,  without  his  knowledge  or 
consent,  it  was  filled  up  by  said  Yale,  and  procured  to  be  discounted. 
The  presiding  judge  ruled  that,  if  the  bank  discounted  the  note  in 
good  faith,  these  facts  would  constitute  no  defense. 

It  becomes  important,  then,  to  see  what  the  paper,  as  it  was  at  first 
delivered,  imported  upon  its  face;  and  whether  it  constituted  a  con- 
tract between  the  parties.  If  it  were  a  complete  and  valid  contract 
as  it  was  delivered,  it  certainly  would  not  be  competent  for  either 
party  to  show  by  parol  that  it  was  not  to  have  the  effect  of  a  con- 
tract, for  this  would  be  to  vary  by  parol  the  meaning  of  a  written 
instrument.  If  it  were  delivered  as  a  perfect  contract,  without  any 
authority  express  or  implied  to  alter  it  in  any  manner,  any  material 


IX.]  BLANKS.  295 

alteration  made  without  the  consent  of  the  promisor  would  avoid  it. 
(^IVadev.   IVtrthington,  i  Allen,  561.) 

Taking  the  written  and  printed  parts  together,  the  note,  as  it  was 
delivered  by  Ives  to  Yale,  reads  as  follows: 

$1585.90.  Brooklyn,  September  20th,  1858 

after  date       promise   to  pay  to  the  order  of 
Dec.  23,  dollars  at 

Value  received. 

Geo.  R.  Ives. 

After  much  consideration  we  are  of  opinion  that  this  was  a  promis- 
sory note,  and  that  testimony  was  not  admissible  to  show  that  it  was 
intended  only  as  a  memorandum.  It  has  the  signature  of  a  promisor; 
a  date;  the  words  "promise  to  pay;"  a  statement  of  the  amount 
payable; '  a  time  of  payment;  and  thus  has  all  the  parts  of  a  complete 
note,  except  the  name  of  a  payee.  But  in  Cruchley  v.  Clarance  (2  M. 
&  S.,  90),  it  was  held  that  issuing  a  bill  with  a  blank  for  the  name 
of  the  payee  would  authorize  a  bona  fide  holder  to  insert  a  name. 
Lord  Ellenborough  said:  "As  the  defendant  has  chosen  to  send 
the  bill  into  the  world  in  this  form,  the  world  ought  not  to  be 
deceived  by  his  acts.  The  defendant  by  leaving  the  blank  undertook 
to  be  answerable  for  it  when  filled  up  in  the  shape  of  a  bill."  And 
in  Crutchly  v.  Maine  (5  Taunt.  529),  a  bill  was  made  payable  to  the 

order  of ,  and  the  court  held  that  any  bearer  who  came  regularly 

by  it  might  fill  the  blank  with  his  own  name.  (See  also  Attwoodv. 
Griffin,  i  Ry.  &  Mood.  425.)  If  it  had  been  passed  to  the  bank 
by  Yale  in  the  condition  in  which  he  received  it,  it  would  therefore 
have  been  a  complete  note,  except  the  name  of  a  payee,  and  the 
bank  would  have  been  authorized  to  fill  the  blank  with  any  name 
that  they  had  chosen;  and  as  they  took  it  in  good  faith,  it  can  make 
no  difference  in  the  rights  of  any  party  that  the  blank  was  filled  by 
Yale,  in  order  to  add  his  own  liability  as  an  indorser. 

But  delivering  the  note  to  Yale  in  that  condition  would  not  of 
itself  give  him  authority  to  alter  it  in  any  particular  in  which  it  was 
already  filled  up  and  completed."  The  date  at  which  it  was  pa)'able 
was  already  inserted,  namely,  "  Dec.  23."  And  although  if  Ives  had 
authorized  the  insertion  of  the  words  "  three  months,"  so  as  to 
make  it  read  "  three  months  after  date,"  the  dates  might  very  likely 
have  been  held  not  to  be  repugnant,  by  considering  the  date  of 
"  Dec.  23  "  as  merely  indicating  the  time  when  the  note  payable  in 
three  months  from  date  would  actually  be  payable,  including  the 

'See  Witty  v.  Michigan  Mutual  Ins.  Co.,  123  Ind.  \\\,  post,  p.  298,  Ed. 
■•'  See  Neg.  Inst.  L.,  §  206  [125],  subsec.  i.  —  Ed. 


296  INTERPRETATION.  [ART.  II. 

days  of  grace,  yet  without  such  authority  the  insertion  of  those 
words  would  make  a  material  alteration  of  the  note.  A  note  payable 
on  "  Dec.  2^,"  being  payable  on  a  day  certain,  would  be  entitled  to 
grace,  and  so  would  not  be  due  until  December  26th.  If  the  case 
is  tried  again,  it  will  therefore  be  proper  to  submit  to  the  jury  the 
question  whether  Yale  was  actually  clothed  by  Ives  with  express  or 
implied  authority  to  fill  up  the  blank  preceding  the  words  "  after 
date"  with  the  words  "  three  months."  It  may  also  be  proper  to 
call  their  attention  to  the  further  consideration,  whether  in  any 
event,  as  for  example  if  Ives  had  neglected  to  pay  the  note  which  he 
borrowed  from  Yale,  it  was  understood  by  the  parties  that  Yale  was 
at  liberty  to  fill  up  the  blanks  so  as  to  make  it  a  note  of  similar  tenor 
with  the  other;  as,  in  such  a  case,  the  rule  adopted  in  Putnain  v. 
Sullivan  (4  Mass.  45),  and  in  Young  v.  Grotc  (4  Bing.  253),  would  be 
applicable,  and  the  premature  or  fraudulent  exercise  of  the  authority 
would  not  affect  the  validity  of  the  instrument  in  the  hands  of  a 
bona  fide  holder.     .     .     . 

§  51  [25]  By  the  settled  law  of  Massachusetts,  a  party  who  takes 
a  negotiable  instrument  in  payment  of  a  pre-existing  debt  is  regarded 
as  entitled  to  the  same  protection  as  any  other  taker  for  a  valuable 
consideration;  and  this  law  must  govern  in  a  trial  in  this  common- 
wealth. {Blanchard  \.  Stevens,  3  Cush.  162;  Chicopee  Bank  v.  C/iapin, 
8  Met.  40;  Stoddard  v.  Kimball,  6  Cush.  469.)  The  same  rule 
prevails  in  Connecticut,  where  the  note  was  negotiated.  {AfcCaskey 
V.  Sherman,  24  Conn.  605.)  It  seems  also  to  be  the  latest  rule 
adopted  in  New  York,  though  the  decisions  in  that  state  have  been 
somewhat  conflicting.     {Youngs  w.  Lee,  2  Kernan,  551.) 

The  request  to  the  court  to  allow  the  jury  to  take  into  considera- 
tion the  appearance  of  the  note,  in  respect  to  the  alleged  alteration, 
does  not  appear  to  have  been  based  upon  any  fact  which  required  it 
to  be  granted. 

Exceptions  sustained. 


§  33  [14]  ViOLETT  V.  Patton,  5  Cranch  (U.  S.)  142.  —  1809.  — 
Marshall,  Ch.  J.  — The  second  objection  is,  that  the  indorsement 
preceded  the  making  of  the  note.  This  objection  certainly  comes 
with  a  very  bad  grace  from  the  mouth  of  Violett.  He  indorsed  the 
paper  with  the  intent  that  the  promissory  note  should  be  written  on 
the  other  side;  and  that  he  should  be  considered  as  the  indorser  of 
that  note.     It  was  the  shape  he  intended  to  give  the  transaction; 


IX.]  BLANKS.  297 

and  he  is  now  concluded  from  saying  or  proving  that  it  was  not 
filled  up  when  he  indorsed  it. 

It  would  be  to  protect  himself  from  the  effect  of  his  promise,  by 
alleging  a  fraudulent  combination  between  himself  and  another  to 
obtain  money  for  that  other  from  a  third  person.  The  case  of 
Russel  V.  Langstaffc,  reported  in  Douglass  [vol.  2,  p  514],  is  con- 
clusive on  this  point.' 

§  33  [14]     Cruchley  v.  Clarance,   2  Maule  &  Selwyn  (K    B.), 

90.  —  1813.     Defendant  drew  a  bill  on  A.,  "  to  the  order  of ." 

[blank.]  B.  indorsed  it  to  plaintiff,  who  inserted  his  name  as  payee. 
Bayley,  J.  — The  issuing  the  bill  in  blank  without  the  name  of  the 
payee  was  an  authority  to  a  bona  fide  holder  to  insert  the  name. 
Per  Cia-iam.     Rule  for  new  trial  denied. 


§  33  [14]  Harvey  v.  Cane,  34  Law  Times  Rep.  (C.  P.),  64.  — 
1876.  C.  sent  a  bill  to  defendant  with  the  drawer's  name  blank. 
Defendant  accepted  it  and  returned  it  to  C.  C.  negotiated  it  to  the 
plaintiff,  who  inserted  his  own  name  as  drawer,  and  sued  defendant 
on  the  bill.  Grove,  J.  — The  case  depends,  first,  on  the  question 
whether,  if  the  drawer's  name  is  not  inserted,  anybody  who  gets  the 
bill  fairly  \s  prima  facie  entitled  to  insert  his  own  name  as  drawer  and 
put  the  bill  in  force,  and  secondly,  whether,  under  the  circum- 
stances of  the  present  case,  the  plaintiff  had  such  authority.  I  am 
of  opinion  that  he  had.  The  reasonable  inference  to  draw  is  that 
there  was  power  to  negotiate  the  bill;  there  were  no  conditions  or 
circumstances  tending  to  show  the  contrary,  or  to  show  that  C. 
only  had  authority  to  insert  his  own  name.  Not  only  had  C.  power 
prima  facie  to  deal  with  the  bill,  but  it  was  intrusted  to  him  without 
conditions,  and  the  correspondence  shows  that  the  defendant  con- 
templated that  C.  should  use  the  bill  as  valid.  The  plaintiff  received 
the  bill  from  C,  and  it  seems  therefore  that  the  plaintiff  had 
authority  to  insert  his  own  name  and  put  the  bill  in  force. 

A  question  might  arise  whether,  supposing  without  the  authority  of 
the  acceptor,  but  by  accident  or  in  consequence  of  some  fraud,  the  bill 
were  to  come  into  the  hands  (^f  a  bona  fide  holder  for  value,  he  would 

'  An  indorsement  of  a  blank  form  of  a  bill  or  note  is  "  a  letter  of  credit  for  an 
indefinite  sum."  The  hf)lder  for  value  and  without  notice  may  enforce  the 
instrument  against  the  indorser,  although  the  one  to  whom  the  indorser  deliv- 
ered it  filled  it  in  with  larger  sums  than  he  was  authorized  to  do.  Kiisscl  v _ 
Langstaffc,  2  Doug.  (K.  13.)  514.  And  the  one  to  whom  it  is  delivered  may 
alter  what  he  has  written  up  to  the  time  the  instrument  is  actually  issued  01 
negotiated.     Dotii^lass  v.  Scott,  8  Leigh  (Va.)  43.  —  Ed. 


298  INTERPRETATION.  [ART.  II. 

be  entitled  to  insert  his  own  name  as  drawer  and  sue  upon  the  bill, 
but  it  is  unnecessary  to  decide  this,  as  it  does  not  arise  here. 
It  is  not  necessary  to  decide  whether,  if  the  instrument  were  filled 
up  without  authority,  and  afterwards  came  into  the  hands  of  a  bona 
fide  holder  for  value,  the  acceptor  could  be  sued  on  it,  or  rather 
whether,  as  Mr.  Channell  contends,  he  \\'0\x\d  prima  facie,  be  liable. 
Here  the  facts  were  that  the  bill  was  given  in  order  that  it  might  be 
put  into  circulation,  and  C.  gave  what  authority  he  himself  had  to 
the  plaintiff,  who  thereby  acquired  a  right  to  sue.' 


34  BAXENDALE  v.   BENNETT.  [§  14J 

L.  R.  3  Queen's  Bench  Division  (C.  A.),  525.  — 1878. 
\_Reported  he7-ein  a//. 280.]  '■' 


X.  Ambig-uous  language. 

I.    Discrepancy  Between  Words  and  Figures. 
§  36    WITTY  V.   MICHIGAN  MUTUAL  LIFE  INS.   CO.   [§  17] 

123  Indiana,  411.  —  1889. 

Berkshire,  J. — This  was  an  action  brought  by  the  appellee 
against  the  appellant  on  the  following  writing: 

$147.70.  Indianapolis,  Ind.,  Nov.  28,  1S83. 

Four  months  after  date  I   promise  to  pay  to  the  order  of  the  Michigan  Mutual 

Life   Ins.   Co.  dollars ,  and   five  per  cent,  attorney's  fees  thereon   per 

annum  from  date  until  paid,  value  received,  without  relief  from  valuation  or 
appraisement  laws  of  the  State  of  Indiana.  The  indorsers  jointly  and  severally 
waive  presentment  for  payment,  protest,  and  notice  of  protest,  and  non-pay- 
ment of  this  note,  and  expressly  agree,  jointly  and  severally,  that  the  holder 
may  renew  or  extend  the  time  of  payment  hereof  from  time  to  time,  and  receive 
interest  in  advance  or  otherwise  from  either  of  the  makers  or  indorsers  for  any 
extension  so  made,  without  releasing  them  hereon. 

Negotiable  and  payable  at . 

J.  B.  Witty. 

Mar.  28,  31,  '84,  Indiana. 

The  appellee,  in  its  complaint,  did  not  ask  for  a  reformation  of 
the  instrument,  but  relied  on  it  as  a  promissory  note  complete  in 
itself. 

'Accord:  Scard  v.  Jackson,  34  L.  T.  Rep.  (C.  P.)  65a;  Moiese  v.  A'napp,  30 
Ga.  942.  —  Ed. 

'See  also  Cape  Ann  N.  B.  v.  Burns,  129  Mass.  596,  post ;  Noll  v.  Smith,  64 
Ind.  511,  post  ;  Brown  v.  Beed,  79  Pa.  St.  370,  post.  —  Ed. 


X.]  AMBIGUOUS   LANGUAGE.  299 

The  appellant  answered  by  the  general  denial  only. 

The  cause  was  submitted  to  the  court  at  special  term,  and  a  find- 
mg  made  for  the  appellee.  The  appellant  filed  a  motion  for  a  new 
trial,  which  the  court  overruled,  and  he  excepted. 

An  appeal  was  taken  to  general  term,  and  upon  the  errors 
assigned  the  judgment  at  special  term  was  affirmed,  and  from  the 
judgment  in  general  term  this  appeal  is  prosecuted. 

There  is  but  one  question  presented  for  our  consideration.  Is  the 
written  instrument,  as  it  appears  in  the  record,  an  enforceable  obliga- 
tion? We  are  of  the  opinion  that  it  is,  if  not  so  otherwise,  by  virtue 
of  §  5501,  R.  S.  1881,  and  is  negotiable  by  indorsement. 

It  is  signed  by  the  appellant,  and  when  taken  as  an  entirety  we 
think  it  contains  a  promise  to  pay  $147.70,  together  with  five  per 
cent,  attorney's  fees.  By  the  very  terms  of  the  instrument  the 
appellant  obligates  himself  to  pay  to  the  appellee  "  dollars,"  and  it 
is  expressly  recited  that  this  promise  rests  upon  a  valuable  considera- 
tion. No  one  can  read  the  writing  without  at  once  coming  to  the 
conclusion  that  the  appellant  intended  to  obligate  himself  to  the 
appellee  for  the  payment  of  some  definite  amount  of  money,  and 
that  the  appellee  understood  that  it  was  receiving  such  an  obli- 
gation. 

Though  there  may  be  some  formal  imperfections  in  a  written  obli- 
gation or  contract  which  parties  have  entered  into,  if  it  contains 
matter  sufficient  to  enable  the  court  to  ascertain  the  terms  and  con- 
ditions of  the  obligation  or  contract  to  which  the  parties  intended  to 
bind  themselves,  it  is  sufficient.  In  the  language  of  Lord  Campbell, 
in  Warrington  v.  Early  (2  Ellis  &  Bl.,  763),  "  the  effect  of  a  written 
contract  is  to  be  collected  from  all  within  the  four  corners  of  the 
document,"  and  no  part  of  what  appears  there  is  to  be  excluded. 
We  can  imagine  no  good  reason  why  the  marginal  figures  upon  the 
writing  in  question  should  be  disregarded. 

We  know  as  a  part  of  the  commercial  history  of  the  country  that 
the  universal  practice  has  been  for  a  period  so  long  that  the  memory 
of  man  runneth  not  to  the  contrary,  to  represent  by  superscription 
in  figures  upon  all  obligations  for  the  payment  of  money  the  amount 
or  sum  which  is  written  in  the  body  of  the  instrument.  The  super- 
scription is  always  intended  to  represent  the  amount  found  in  the 
body  of  the  instrument,  and  not  a  different  amount;  if,  therefore,  an 
obligation  is  found  where  there  is  a  promise  to  pay  "  dollars,"  but 
the  number  oi  dollars  in  the  body  of  the  instrument  is  blank,  and  the 
margin  of  the  instrument  is  found  to  contain  a  superscription  which 
states  the  number  of  dollars,  why,  in  view  of  the  usage  or  custom 
which  has  so  long  prevailed,  should  the  body  of  the  instrument  not 


300  INTERPRETATION.  [ART.  II. 

be  aided  by  the  superscription?  We  think,  in  such  a  case,  the  figures 
found  in  the  margin  should  be  taken  as  the  amount  which  the  obligor 
intended  to  obligate  himself  to  pay,  and  the  obligation  enforced 
accordingly.  We  do  not  think,  in  such  a  case,  that  the  courts  would 
be  justified  in  disregarding  the  evident  intention  of  the  parties  as 
indicated  by  the  superscription  upon  the  paper,  and  in  holding  the 
instrument  void  for  uncertainty,  or  on  the  ground  that  it  is  not  a 
perfect  writing.  And  especially  are  we  of  the  opinion  stated,  in  view 
of  the  liberal  statute  which  we  have  on  the  subject  of  promissory 
notes  and  other  written  obligations  and  their  negotiation.  (Section 
5501,    si/pra.) 

In  the  case  under  consideration  the  action  is  between  the  original 
parties  to  the  instrument,  and  upon  it  in  the  form  and  condition  in 
which  it  was  executed,  and,  therefore,  we  do  not  think  it  would  be 
profitable  to  consider  questions  which  might  arise  where  the  obliga- 
tion is  made  payable  at  a  bank,  the  blank  number  of  dollars  after- 
wards filled  in  by  the  payee  and  indorsed  by  him  to  an  innocent 
holder  for  value  before  maturity.  As  to  whether  the  writing  would 
be  a  negotiable  instrument  in  its  present  condition  but  for  our  statute, 
we  find  some  conflict  of  authority.  We  cite  the  following  authori- 
ties for  and  against  the  proposition: 

(For  —  Ives  Y.  Farmers'  Bank,  2  Allen,  236;  Siveetscr  v.  Frettch, 
13  Met.  262;  Fetiy  v.  Fleishel,  31  Texas,  169;  Corgan  v.  Frew,  39 
111.  31;    Williamsons.  Smith,  i  Cold.  [Tenn.],  i.) 

(Against  —  Norwich  Bank  v.  Hyde,  13  Com.  279;  Edwards,  Bills, 
p.  168;  Hollcn  v.  Davis,  59  Iowa,  444;  44  Am.  Rep.  688  and  note.) 

We  find  no  error  in  the  record. 

Judgment  is  affirmed,  with  costs.' 

§  36  [17]  Mears  v.  Graham,  8  Blackf.  (Ind.)  144.  —  1S46. 
Blackford,  J.  —  The  circumstance  that  the  figures  in  the  margin  of 
the  note  are  "$331. 15"  and  the  words  in  the  body  are  "  three  hundred 
and  thirty-three  dollars  and  fifteen  cents,"  does  not  affect  the 
validity  of  the  note.  The  words  in  the  body  must  govern,  and  the 
note  is  therefore  for  $333.15. 


'  See  also  Ives  v.  Farmers'  Bank,  1  Allen  (Mass.)  236,  ante,  p.  293. 

A  note  for  thee  hundred  dollars,  the  figures  being  $300,  is  good  for  three  hun- 
dred dollars,  if  the  maker  intended  it  to  be  for  three  hundred.  Bitmham  v. 
Allen,  I    Gray  (Mass.)  496.     A  bill   payable   in   the   United   States   for  "  3,000," 

three  thousand  ,"  omitting  the  dollar-mark  and  the  word"  dollars,"  is  a 

valid  bill  for  three  thousand  dollars.  Williamson  v.  Smith,  i  Cold.  (Tenn.) 
I.  —  Ed. 


X.]  AMBIGUOUS   LANGUAGE.  30I 

2.   Interest,  How  Computed. 

§  36  [17]  Campbell  Printing  Press,  etc.,  Co.  v.  Jones,  79 
Alabama,  475,-1885.  Clopton,  J.  -The  principle  seems  to 
be  settled,  that  a  promissory  note  payable  at  a  future  day,  wM 
interest,  bears  interest  from  date,  it  being  considered  as  a  part  of  the 
debt.  {Donian  v.  Dibden,  R.  &  M.  280;  Richards  v.  Richards,  2 
B.  &  Ad.  447;  Lerzenberg  v.  Cleveland,  19  La.  An.  473.)  .  .  . 
Otherwise,  the  words,  bearing  legal  rate  of  interest,  would  be  without 
meaning  and  operation.  Such  is  the  legal  effect  after  maturity, 
without  express  stipulation.  In  Kennedy  \.  Nash  (i  Starkie,  452), 
Lord  Ellenborough  held,  '  that  under  the  words,  bearing  interest, 
the  plaintiff  was  entitled  to  recover  interest  from  the  date  of  the  bill, 
since,  without  any  such  words,  he  would  be  entitled  to  interest  from 
the  time  when  the  bill  became  due.'  The  obligation  of  the  note  is 
to  pay  the  principal,  with  interest.  To  limit  the  time  when  the 
interest  begins  to  run,  to  maturity,  is  to  presume  that  the  parties 
contemplated  the  notes  would  not  be  paid  when  payable,  and  there- 
fore provided  they  should  bear  interest  thereafter.  In  order  to 
give  some  effect  to  all  the  terms  of  the  notes,  our  conclusion  is, 
that  the  interest  runs  from  date.' 


3.   Instrument  Not  Dated. 

?  36  [17]  Richardson  v.  Ellett,  10  Texas,  190.  — 1853. 
Hemphill,  Ch.  J.  — Nor  is  the  judgment  excessive,  as  charged  by 
the  plaintiff  in  error.  It  is  true  that  the  note,  as  copied  in  the 
petition,  does  not  bear  any  date;  but  the  petition  avers  it  to  have 
been  executed  on  the  8th  day  of  January,  1850,  a  fact  not  contro- 
verted by  the  defendant.  By  its  terms  the  instrument  bears  interest 
from  its  date,  and  it  appears  to  have  been  accurately  estimated.'' 

4.   Conflict  Between  Written  and  Printed  Provisions. 

§  36  [17]  American  Express  Co.  ?'.  Pinckney,  29  III.  392. — 
1862.  Action  for  negligence  in  collecting  a  draft.  The  question 
arises  on  the  construction  of  a  partly  printed  and  partly  written 
receipt  by  defendant.  Breese,  J.  — The  principle  applicable  in  all 
such  cases  is,  that  a  writing  must  be  construed  according  to  the 
clear  intent  of  the  parties,  if  that  can  be  collected  from  the  face  of 
the    instrument.     .     .      .      But    there   is    another    principle    of    law 


'  Interest  on  notes  payable  on  demand  runs  only  from  the  time  of  demand. 
Hunter  V.   Wood,  54  Ala.  71;  Dod^e  v.  Perkins,  9  Pick.  (Mass.)  369.  —  En. 

''See  Byles  on  Bill?  (13th  ed.),  p.  79-  See,  as  to  date,  §  25  [6],  §  30  [11], 
ante.  —  En. 


302  INTERPRETATION.  [ART.  II. 

applicable.  In  a  case  where  the  agreement  is  partly  written  and  in 
part  printed,  the  preference  is  always  given  to  the  written  part. 
What  is  printed  is  intended  to  apply  to  large  classes  of  contracts, 
and  not  to  anyone  exclusively;  the  blanks  are  left  purposely,  that 
the  special  statements  or  provisions  should  be  inserted  which  belong 
to  the  particular  contract,  and  not  to  others,  and  thus  to  discrimin- 
ate this  from  others.  So  Lord  Ellenborough  held,  in  the  case  of 
Robertson  and  Thomasson  v.  French  (4  East,  360),  when  he  said,  that 
words  superadded  in  writing  are  entitled,  if  there  should  be  any 
reasonable  doubt  upon  the  sense  and  meaning  of  the  whole,  to  have 
a  greater  effect  attributed  to  them,  than  to  the  printed  words,  inas- 
much as  the  written  words  are  the  immediate  language  and  terms 
selected  by  the  parties  themselves  for  the  expression  of  their  mean- 
ing, and  the  printed  words  are  a  general  formula  adapted  equally  to 
their  case,  and  that  of  all  other  contracting  parties,  upon  similar 
occasions  and  subjects. 


5.   Doubt  Whether  Bill  or  Note. 
§  36  FUNK  V.   BABBITT.  [§  I?] 

156  Illinois,  40S.  —  1895. 
\_Reported  herein  at  p.  272.]  * 


6.  Irregular  Signature. 
36  HERRING  V.  WOODHULL.  [§  17] 

29  Illinois,  92.  —  1S62. 
\Reported  herein  at  p.  348.]^ 


7.  Joint  and  Several  Liability 

§  36  DART  V.   SHERWOOD.  [  17] 

7  Wisconsin,  523.  —  1858. 

This  is  an  action  of  assumpsit  brought  by  the  appellee  against  the 
appellants,  as  joint  makers  of  a  promissory  note,  which  read  as 
follows: 

1  See  also  Peto  v.  Reynolds,  9  Exch.  410,  ante,  p.  27111;  and  compare  Watrous 
V.  Holbrook,  39  Tex.  573,  ante,  p.  270.  —Ed. 

2  See  §  113  [63],  114  \(i\\post,  and  cases.  —  Ed. 


X.]  AMBIGUOUS   LANGUAGE.  303 

$400.  RiPON,  Wis.,  Nov.  s^th,  1856. 

Thirty  days  after  date,  for  value  received,  I  promise  to  pay  Putnam  C.  Dart, 
or  order,  four  hundred  dollars,  with  interest,  at  the  rate  of  twelve  per  cent,  per 
annum. 

J.  C.  Sherwood. 
Wm.  C.  Sherwood, 

Surety. 

Both  the  appellants  put  in  a  plea  of  the  general  issue,  with  the 
usual  notice  of  set  off  by  the  defendant,  John  C.  Sherwood. 

On  the  trial  the  plaintiff  offered  the  note  in  evidence,  and  the 
defendants  made  two  objections  to  the  reading  of  the  same:  i.  That 
the  note  could  not  be  read  under  the  common  counts  and  notice. 
2.  That  the  note  did  not  show  a  joint  liability.  The  court  allowed 
the  note  to  be  read,  and  the  plaintiff  rested  his  case.  The  defendants 
moved  for  a  nonsuit  on  the  ground  that  there  was  a  mis-joinder  of 
parties  defendant.     This  motion  was  denied. 

The  defendant,  John  C.  Sherwood,  then  offered  to  prove  a  set-off, 
consisting  of  the  payment  of  moneys  by  him,  the  said  John  C,  for 
the  plamtiff,  which  was  objected  to  by  the  counsel  for  the  plaintiff, 
and  the  objection  sustained  by  the  court;  to  which  the  defendant 
excepted. 

Judgment  was  then  rendered  by  the  court  against  the  defendants 
for  the  sum  of  damages,  four  hundred  and  fifty-two  dollars  and 
eighty  cents,  and  thirty-three  dollars  and  eighty-two  cents  costs. 

From  which  judgment  this  appeal  is  taken. 

By  the  Court  —  Whiton,  C.  J.  —  The  judgment  of  the  court  below 
is  correct  and  must  be  affirmed.  The  note  declared  upon  is  the  joint 
and  several  note  of  the  defendants;  joint  because  it  is  signed  by 
both;  and  several,  because  each  defendant  promised  severally. 
(Story  on  Promissory  Notes,  §  57;  Hunt  v .  Adams,  5  Mass.  R.  358; 
Samev.  Same,  6  do.  519.) 

The  objection  taken  to  its  introduction  in  evidence  under  the 
common  counts  has  no  existence  in  fact,  because  it  was  specially 
declared  upon  according  to  its  legal  effect. 

We  have  no  doubt  that  as  to  the  payee  of  the  note  the  defendants 
were  both  principals,  though  we  do  not  see  as  that  question  arises 
in  the  case. 

The  offer  to  prove  the  set-off  was,  under  the  circumstances  of  this 
case,  properly  rejected.  The  action  was  against  two  makers  of  a 
promissory  note,  and  the  defendant,  John  C.  Sherwood,  offered  to 
prove  a  set-off  consisting  of  moneys  paid  by  him  for  the  benefit  of 
Dart.  It  is  well  settled  that  one  of  several  defendants  cannot  set 
off  a  debt  due  him  alone  from   the  plaintiff  against  a  joint  debt. 


304  INTERPRETATION.  [ART.  II. 

(Sub.  6,  §  I,  chap.  94,  of  R.  S. ;  JVarnei-  v.  Backer,  3  Wend.  R.  400; 
Wolfe  V.  Washburne,  6  Cowen  R.  261.  §  12,  chap.  93,  of  R.  S.,  we 
do  not  think  has  any  application  to  this  case.) 

The  judgment  of  the  circuit  court  must,  therefore,  be  affirmed.* 


XI.  Ambiguous  signatures. 

I.   Only  Those  Liable  Whose  Signatures  Appear. 

$<  37  ANDENTON  7:   SHOUP.  [§  18] 

17  Ohio  State,  125.  —  1866. 

Action  against  George  W.  Shoup  on  the  following  instrument: 

Dayton,  August  11,  1861. 
Dayton   Branch,  State   Bank  of  Ohio,   pay   to  J.  B.,  or  bearer,  two  hundred 
thirty  dollars. 

Samuel  Shoup,  Agent. 


Allegation  that  Samuel  Shoup  was  defendant's  agent  and  acted  as 
such  in  drawing  the  check;  that  plaintiff  is  holder  in  due  course; 
that  the  check  was  duly  presented  and  was  dishonored,  etc. 

Demurrer  sustained  and  judgment  for  defendant.    Plaintiff  appeals. 

Day,  C.  J.  — The  averments  in  the  petition  will  not  warrant  the 
claim  in  argument,  that  this  is  a  case  where  a  party  himself  uses  a 
name  other  than  his  own  in  the  transaction  of  his  business.  The 
most  that  can  be  claimed  is,  that  the  principal  allowed  the  agent  to 
sign  his  own  name  as  agent  in  the  transaction  of  some  of  the  business 
of  the  principal. 

It  is  undoubtedly  well  settled  that,  where  an  ordinary  simple  con- 
tract is  signed  by  an  agent  in  his  own  name,  with  the  addition  of  the 
word  "  agent  "  thereto,  the  principal  may  be  made  liable  thereon, 
whether  his  name  appears  on  the  paper  or  not.  (Story  on  Agency, 
§  i6oa.,  and  authorities  there  cited.)  But,  for  commercial  rea- 
sons, a  distinction  is  taken,  in  the  authorities,  between  contracts  of 
this  class  and  negotiable  paper.  As  to  bills  of  exchange,  it  is  said 
that  the  agent  "  must  either  sign  the  name  of  the  principal  to  the 
bill,  or  it  must  appear  on  the  face  of  the  bill  itself,  in  some  way,  that  it 
was  drawn  for  him,  or  the  principal  will  not  be  bound."  (Edw.  on 
Bills,  80;   Chitty  on  Bills,  27.) 

'  Accord:  Monson  v.  Drakch-y,  40  Conn.  552;  Ely  v.  Clutc,  19  Hun  (N.  Y.)  35; 
Wallace  v.  Jewell,  21  Oh.  St.  163.  —  Ed. 


XL]  AMBIGUOUS    SIGNATURES.  305 

The  question  as  to  the  liability  of  the  principal,  on  paper  executed 
by  an  agent  in  his  own  name,  was  well  considered  by  the  Supreme 
Court  of  ^iassachusetts,  in  the  cases  of  the  Eastern  Railroad  Company 
V.  Benedict  (5  Gray,  561),  and  the  Bank  of  America  v.  Hooper  (lb. 
567.) 

In  the  latter  case,  it  is  said  that  "  there  will  be  found  to  be  a  leading 
distinction  taken  between  cases  of  commercial  paper  in  the  form  of 
bills  of  exchange  and  negotiable  promissory  notes,  and  other  simple 
contracts,  holding  that  no  one  but  a  party  to  such  negotiable  paper 
can  be  sued  for  the  non-payment  thereof."  In  support  of  this  dis- 
tinction the  following  authorities  are  there  cited  :  (Byles  on  Bills  [5th 
ed.],  26;  EmlyN.  Lye,  15  East,  7;  Bechajn  v.  Drake,  9  M.  &  W.  92; 
/'<'/;/ V.  ^/i?;//(;;/,  10  Wend.  276;  Stackpole  \.  Arnold,  11  Mass.  27;  Bed- 
ford Com.  Ins.  Co.  V.  Covell,  8  Met.  442;    Taber  \ .  Cannon,  Id.  456.) 

The  case  of  De  Witt  v.  IFa/ton  (5  Seld.  571),  decided  by  the  New- 
York  court  of  appeals,  is  a  strong  case  to  the  same  point.  It  was  a 
suit  brought  on  a  negotiable  promissory  note,  signed  "  David  Hub- 
bell  Hoyt,  agent  for  '  The  Churchman.'  "  Hoyt  was  an  agent 
for  a  paper  called  "The  Churchman."  and  was  authorized  to 
contract  for  the  proprietor  in  that  name,  and  the  suit  was  against 
the  proprietor,  Hoyt's  principal.  It  is  said  in  the  opinion,  that 
"  the  good  sense  of  many  authorities  upon  this  subject  would  seem 
to  be,  that,  where  a  party  is  sought  to  be  charged  upon  an  express 
contract,  it  must  at  least  appear  upon  the  face  of  the  instrument 
that  the  agent  undertook  to  bind  him  as  principal.  Here  the  promise 
is  not  by  the  defendant  or  '  The  Churchman,'  nor  by  Hoyt  for 
them  or  either  of  them,  or  in  their  behalf,  but  for  himself.  The 
formula  used  by  him  in  the  signature  to  the  note  in  controversy  has 
been  determined,  in  this  and  other  states,  to  create  an  obligation  on 
the  part  of  the  agent  personally,  and  not  in  behalf  of  the  principal. 
There  is  no  great  hardship  in  requiring  that  if  a  man  undertakes  to 
oblige  another,  by  note,  bill  of  exchange,  or  other  commercial  instru- 
ment, he  should  manifest  his  purpose  clearly  and  intelligibly,  or  that 
his  principal  will  not  be  bound,  whatever  may  be  the  result  in  refer- 
ence to  himself. " 

It  was  further  held  in  this  case,  that  the  words  added  to  the  name 
of  the  person  signing  the  paper  was  merely  descriptio  per  some. 

The  principle  maintained  in  these  cases,  it  is  said  by  the  author  of 
the  notes  in  Smith's  Leading  Cases  (vol.  2,  p.  433),  "  would  seem 
to  be  well  settled  on  both  sides  of  the  Atlantic." 

These  principles  applied  to  the  case  before  us  are  decisive  of  it. 
The  name  of  the  defendant  is  in  no  way  indicated  upon  the  face  of 
the  instrument  upon  which  alone  the  action  is  based. 

NEGOT.   INSTRUMENTS  —  20 


306  INTERPRETATION.  [ART.  II. 

It  follows,  therefore,  that  the  ruling  of  the  court  below  was  cor- 
rect, and  that  the  judgment  rendered  by  it  must  be  affirmed.' 


2.   Assumed  or  Trade  Name. 
37  BROWN  V.   BUTCHERS  AND  DROVERS'    BANK.    [§  i8J 

6  Hill  (N.  Y.),  443.  —  1844. 
{^Reported  herein  at  p.  164.] 


§  37    .  BARTLETT  v.  TUCKER.  [§  18] 

104  Massachusetts,  336.  —  1870. 

Contract  upon  eleven  promissory  notes,  each  bearing  another 
name  than  that  of  the  defendant  as  maker,  but  alleged  to  have  been 
signed  by  him,  payable  to  the  order  of  the  firm  of  Coe  &  Company, 
and  by  them  indorsed. 

The  first  count  was  as  follows:      "  And   the    plaintiff   says    the 

'  Only  those  who  appear  as  parlies  upon  the  face  of  a  negotiable  instrument 
can  sue  or  be  sued  upon  it.  Huffcut  on  Agency,  §§  128,  135,  1S9-195;  Gi-ist  v. 
Backhouse,  4  Dev.  &  Battle  (N.  C.)  362;  Sparks  v.  Dispatch  Transfer  Co.,  104 
Mo.  531;  Bradlee  v.  Boston  Glass  M'f'y,  16  Pick.  (Mass.)  347;  Manufacturers 
and  Traders^  Bank  v.  Love,  13  App.  Div.  (N.  Y.)  561.  Where  the  name  of  the 
principal  and  the  name  of  the  agent  both  appear  upon  the  instrument,  it  is  a 
matter  of  construction  which  is  bound,  and,  in  cases  of  ambiguity,  parol  evi- 
dence is  admissible  to  fix  the  liability.  Huffcut  on  Agency,  §§  189-195.  There 
is  great  diversity  among  the  decisions  in  construing  these  signatures.  Ibid. 
Some  courts  have  shown  a  greater  liberality  in  holding  the  signatures  of  bank 
cashiers  {e.  g.  "A.  B.,  Cashier),"  and  corporation  officers  {e.  g.  "A.  B.  Presi- 
dent ")  to  be  the  signatures  of  the  bank  or  corporation  than  in  the  case  of  sig- 
natures of  agents  of  individuals  {e.  g.  "A.  B.  Agent;  ")  especially  where  the 
name  of  the  principal  appears  in  the  heading  or  on  the  margin  of  the  inslru- 
ment.  Ibid,  §  192;  Hitchcock  v.  Btichanan,  105  U.  S.  416;  Chipman  v.  Foster 
119  Mass.  189,  post.    Contra,  Casco  Nat.  Bank  v.  Clark,  139  N.  Y, :  307, /('.rA  —  Ed. 

A  partnership  bill  or  note  in  order  to  bind  the  firm  must  be  signed  in  the  part- 
nership name.  Si f kin  v.  Walker,  2  Camp.  308;  A'irk  v.  Blurton,  9  M.  &  W. 
284;  A'ational  Bank  v.  Meader,  40  Minn.  325.  But  if  the  bill  be  drawn  on  the 
firm  and  accepted  by  one  partner  in  his  own  name,  it  has  been  held  that  the 
firm  is  bound.  Mason  v.  Ruuisey,  i  Camp.  384;  Tolman  v.  Hanrahan,  44  Wis. 
133.  But  see  contra,  Hccnan  v.  A^ash,  8  Minn.  407.  Where  the  firm  does  busi- 
ness in  the  name  of  one  partner,  a  bill  or  note  executed  in  that  name,  while 
prima  facie  the  obligation  of  the  individual,  maybe  shown  to  be  that  of  the 
partnership,  i  Daniel  on  Neg.  Inst.,  §  363;  Rumsey  v.  Briggs,  139  N.  Y. 
323.  —  Ed. 


XL]  AMBIGUOUS    SIGNATURES.  307 

defendant  made  a  promissory  note,  a  copy  whereof  is  hereto  annexed, 
payable  to  the  order  of  Coe  Tv:  Company,  and  Coe  &  Company  in- 
dorsed the  same  to  the  plaintiff;  that  the  defendant  signed  said  note 
in  the  name  of  James  H.  Stearns;  that  said  James  H.  Stearns  was  a 
fictitious  party  or  name,  there  being  no  such  person,  or  no  such 
person  whose  name  the  defendant  was  authorized  to  sign;  where- 
fore the  plaintiff  says  said  note  is  the  note  of  tlie  defendant,  made 
and  signed  by  him,  and  that  he  owes  the  plaintiff  the  amount  thereof, 
with  interest  and  costs  of  protest."  Each  count  was  in  like  form, 
annexing  a  copy  of  the  note,  and  the  name  signed  to  nearly  every 
note  being  different  from  that  signed  to  the  others. 

Trial  before  Gray,  /.,  who  reserved  the  case  upon  the  following 
report:  "  The  plaintiff  offered  to  prove  that  these  notes  were  made 
and  signed  by  the  defendant,  and  that  the  signatures  so  affixed  by 
him  were  either  of  fictitious  persons,  or  persons  whose  names  he  had 
no  authority  to  sign  or  use;  that  the  defendant  made  the  notes  for 
and  at  the  request  of  Coe  &  Company,  with  the  knowledge  that  they 
intended  to  negotiate  and  use  them  as  their  business  paper,  for  the 
purpose  of  raising  money  to  be  used  in  their  business;  and  that  the 
plaintiff  bought  the  notes  from  Coe  &  Company  before  maturity,  for 
full  consideration,  as  their  business  paper.  The  plaintiff  did  not 
offer  to  prove  that  the  defendant  had  ever  used  either  of  the  names 
signed  to  these  notes  for  the  purpose  of  transacting  any  other  busi- 
ness, or  had  held  himself  out  to  the  world  as  doing  business  under 
either  of  these  names;  or  that  the  plaintiff  had  any  knowledge, 
when  he  took  the  notes,  that  they  were  signed  by  the  defendant,  or 
gave  him  any  credit  thereon.  The  plaintiff  contended,  that,  if  he 
satisfied  the  jury  that  the  defendant  signed  either  fictitious  names 
to  the  notes,  or  the  names  of  real  persons  without  any  authority 
from  them,  he  would  be  liable  in  this  action.  If,  in  the  opinion  of 
the  full  court,  this  position,  or  either  alternative  thereof,  can  be 
maintained,  the  case  is  to  stand  for  trial;  otherwise  judgment  is  to 
be  rendered  for  the  defendant." 

Gray,  J.  — Although  the  question  presented  by  this  case  is  novel 
in  one  of  its  aspects,  the  law  of  this  Commonwealth,  as  established 
by  previous  decisions  of  this  Court,  will  go  far  to  assist  us  in  deter- 
mining it. 

It  is  well  settled  that  any  person  taking  a  negotiable  promissory 
note  contracts  with  those  only  whose  names  are  signed  to  it  as 
parties,  and  cannot  therefore  maintain  an  action  upon  the  note 
against  any  other  preson.  (Bank  of  British  North  America  v.  Hooper, 
5  Gray,  567;  Williams  v.  Robbins,  16  Gray,  77;  Broicm  v.  Parker, 
7  Allen,  337;    Tucker  Manufactiiriiii:;  Co.  v.  Fairbanks,  98  Mass.   loi. 


308  INTERPRETATION.  [ART.  II. 

104,  and  other  cases  there  cited.)  That  rule,  of  cours2,  does  not 
preclude  charging  a  party  who,  instead  of  the  name  by  whicli  he  is 
usually  known,  signs,  with  intent  to  bind  himself  thereby,  his  initials, 
or  a  mark,  or  any  name  under  which  he  is  proved  to  have  held  him- 
self out  to  the  world  and  carried  on  business.  {^Merchants  Bank  v. 
Spicci\  6  Wend.  443;  George  v.  Surrey,  Mood.  &  Malk.  516;  William- 
son V.  J^ohnson,  2  D.  &  R.  281,  s.  c.  i  B.  &  C.  146;  Fuller  v.  Hooper^ 
3  Gray,  334.) 

But  if  a  person  signs  the  name  of  another,  as  maker  of  a  promis- 
sory note,  who  has  not  authorized  him  to  do  so,  and  who  therefore 
is  not  bound  by  the  signature,  the  signer  is  not  personally  liable  in 
an  action  of  contract  upon  the  note  itself,  even  if  he  signs  his  own 
name  also  as  that  of  the  agent  affixing  the  other  signature,  and  the 
party  whose  name  he  assumes  to  put  to  the  note  is  incapable  of  mak- 
ing such  a  contract;  but  only  in  an  action  of  tort  for  falsely  repre- 
senting himself  to  be  authorized  to  sign  the  name  of  the  other  person. 
This  rule  has  been  asserted  and  steadfastly  maintained  by  this 
court  for  half  a  century.  [Citing  and  discussing  Long  v.  Colburn,  11 
Mass.  97;  Ballon  v.  Talbot,  16  Mass.  461;  Jefts  v.  York,  4  Cush. 
371,  s.  c.  10  Cush.  392;  Abbey  v.  Chase,  6  Cush.  54;  Draper  v.  Mass., 
etc.,  Co.,  5  Allen,  338.]' 

Ill  the  present  case,  the  plaintiff  counts  upon  the  notes  them- 
selves, seeking  to  charge  the  defendant  as  the  maker  of  them,  upon 
the  alternative  ground  that  the  name  signed  by  him  to  each  of  the 
notes  was  either  the  name  of  a  person  whose  name  he  had  no 
authority  to  sign  or  use,  or  the  name  of  a  iictitious  person. 

If  either  of  those  names  was  that  of  a  real  person,  then,  although 
no  agency  was  expressed  on  the  face  of  the  note,  and  whether  the 
signature  was  affixed  under  a  mistaken  belief  of  authority,  or  fraudu- 
lently, or  even  if  it  was  a  forgery,  it  was,  so  far  as  regards  the  lia- 
bility to  a  civil  action  upon  the  notes,  a  mere  case  of  signing  without 
authority,  and  the  signature  might  be  adopted  or  ratified  by  that 
person,  and  such  adoption  or  ratification  would  render  him  liable  to 
be  sued  as  maker  thereof.  {Ballon  v.  Talbot,  16  Mass.  461,  463; 
Merrifield  V.  Farritt,  11  Cush.  590,  597;  Brighani  v.  Feters,  i  Gray, 
139;  Mclntxre  v.  Fark,  11  Gray,  102;  Greenfield  Bank  v.  Crafts,  4 
Allen,  447;  Hunter  M.  Giddings,  97  Mass.  41.)  In  such  a  case,  it  is 
clear  that  bv  the  law  of  this  Commonwealth,  as  shown  by  the  cases 
already  cited,  the  defendant  could  not  be  sued  in  contract  upon  the 
note,  but  only  in  tort.     (See  also  Met.  Con.  108,  109.) 

The  same  rule  must  apply  if  the  names  signed  to  any  of  the 
notes  were  those  of  fictitious  persons.     In  either  alternative,   the 


1  See  Neg.  Inst.  L.,  ^  39  [20].  —  Ed. 


XL]  AMBIGUOUS    SIGNATURES.  309 

notes  were  not  signed  in  the  defendant's  own  name,  nor  by  any 
name  under  which  he  was  sliovvn  to  have  transacted,  or  held  himself 
out  as  transacting,  other  business.  The  defendant  has  not,  by  word 
or  act,  asserted  that  they  were  his  own  promissory  notes.  The 
plaintiff  did  not  take  them  immediately  from  him,  or  on  his  credit. 
The  defendant  therefore  is  not  estopped  to  deny  them  to  be  his.  The 
defendant's  representation  was,  that  they  were  signed  by  parties  bear- 
ing, or  doing  business  under,  the  names  signed.  He  made  no  con- 
tract, and  intended  to  make  no  contract,  and  was  not  understood  by 
any  other  party  to  make  any  contract,  himself.  His  relation  to  the 
plaintiff  was  not  one  of  contract,  but  of  tort.  The  case  is  not  dis 
tinguishable  in  principle  from  that  of  Jefts  v.  York  (10  Cush.  392), 
already  stated.  There  is  no  essential  difference  in  this  respect  be- 
tween a  note  purporting  to  be  made  by  a  person  or  corporation  that 
has  no  capacity  to  make  it,  and  a  note  purporting  to  be  made  by  one 
that  in  fact  has  no  existence;  or  between  a  note  on  which  the  name 
of  the  person  by  whose  hand  it  is  written  appears,  and  a  note  on 
which  it  does  not;  and  no  more  reason  for  holding  him  liable  to  an 
action  upon  it  as  his  own  contract  in  the  one  case  than  in  the  other. 

The  cases  cited  by  the  learned  counsel  for  the  plaintiff,  when 
closely  examined  and  weighed,  afford  no  sufficient  ground  for  a 
different  conclusion. 

The  strongest  case  in  his  favor  is  tnat  of  Grafton  Bank\.  Flanders 
(4  N.  H.  239).  It  was  there  held  that  a  person  who  signed  the 
name  of  another  to  a  promissory  note  as  maker  without  any  authority 
from  him,  and  delivered  it  to  the  payee  for  a  valuable  consideration, 
was  himself  liable  upon  the  note  as  maker  in  an  action  by  the  payee, 
charging  him  as  having  made  it  in  the  name  of  the  other  person. 
It  is  to  be  observed  that  in  that  case  the  defendant  himself  delivered 
the  note  to  the  plaintiff.  And  a  careful  consideration  of  the  elab- 
orate opinion  of  the  court  has  failed  to  satisfy  us  that  it  is  in  accord- 
ance with  the  law  of  this  Commonwealth.  The  courts  of  New 
Hampshire  have  always  gone  beyond  our  own  in  holding  a  person 
signing  the  name  of  another  without  authority  to  be  himself  liable 
to  an  action  upon  the  contract.  (JJnderhill  \.  Gibson,  2  N.  H.  352, 
356;  Woodes  V.  Dennett,  9  N.  H.  55;  Fettingi/tw  McGregor,  12  N.  H. 
179,  191;  Moor  V.  IVi/son,  6  Foster,  332,  336;  IVeare  v.  Go7U',  44 
N.  H.  196.) 

In  Falnier  v.  Stephens  (i  Denio,  471),  the  defendant  had  signed 
the  promissory  note  sued  on  with  his  own  initials;  the  court  expressly 
waived  the  consideration  of  the  ([uestion  whether,  if  neither  his  name 
nor  the  initial  letters  thereof  had  appeared  on  the  paper,  he  could 
have  been  holden  as  a  party  to  it;  and  the  general  statement  in  the 


3IO  INTERPRETATION.  [ART.  II. 

opinion,  that,  "  if  one,  assuming  to  be  agent  of  another  person, 
executes  a  note  in  his  name,  having  in  truth  no  authority  for  the 
purpose,  the  assumed  agent  is  himself  bound  by  the  signature," 
though  supported  by  the  earlier  cases  in  New  York,  is  inconsistent 
with  the  later  cases  in  that  state,  as  it  is  with  our  own  decisions. 
{]Valker  v.  Bank  of  New  York,  5  Selden,  582;  White  v.  Madison,  26 
N.  Y.   117.) 

In  Brown  v.  Butchers  and  Drovers'  Bank  (6  Hill,  443),  the  signa- 
ture which  was  held  to  bind  the  defendant  as  indorser  of  a  bill  of 
exchange  was  not  of  another  name  than  his  own,  but  of  figures;  and 
the  report  states  that  evidence  was  given  strongly  tending  to  show, 
not  only  that  they  were  in  his  handwriting,  but  that  he  meant  they 
should  bind  him  as  indorser. 

The  case  of  Melledge  v.  Boston  Iron  Co.  (5  Cush.  158),  went  no 
farther  than  to  hold  that  a  corporation  was  liable  on  a  note  given 
by  its  general  agents,  a  mercantile  firm,  in  their  own  name,  for  a 
debt  of  the  corporation,  if  the  note  w^as  in  fact  the  note  of  the  cor- 
poration, executed  under  a  name  which  it  had  adopted  and  sanc- 
tioned as  indicative  of  its  contracts,  or  if  the  payee  took  the  note 
under  a  misapprehension,  caused  by  the  acts  of  the  corporation  and 
its  agents,  as  to  the  identity  of  the  corporation  with  the  firm  whose 
name  was  signed  to  the  notes.  The  doctrine  of  that  case  does  not 
warrant  charging  either  a  corporation  or  a  natural  person  upon  a 
note  signed  in  the  name  of  another,  without  clear  proof  that  such 
name  has  been  adopted  by  the  first  for  the  purpose  of  transacting 
business.  (^Williams  v.  Bobbins,  16  Gray,  77;  Brown  v.  Barker,  7 
Allen,  337.) 

The  remark  of  Mr.  Justice  Hoar,  in  Draper  v.  Massachusetts  Steam 
Heating  Co.  (5  Allen,  338),  that  "  there  may  be  cases  in  which  the 
signature  is  in  such  a  form  that  it  might  be  held  to  be  either  the 
signature  of  the  principal  or  of  the  agent,  and  in  such  case  a  want 
of  authority  to  bind  the  principal  might  well  be  regarded  as  fixing 
the  personal  liability  of  the  agent,"  related  to  cases  in  which  the 
names  of  both  agent  and  principal  appeared  upon  the  face  of  the 
contract,  and  in  a  form  making  it  doubtful  which  was  intended  to 
be  bound. 

The  plaintiff  much  relied  on  the  English  cases  in  which  an  acceptor 
of  a  bill  of  exchange,  in  which  a  fictitious  person  was  named  as  payee, 
has  been  held  to  stand  as  if  it  had  been  payable  to  bearer,  and  to 
be  liable  for  the  amount  of  the  bill  to  one  who  has  discounted  it  on 
the  faith  of  his  acceptance,  even  when  the  signature  of  the  drawer 
for  whose  honor  he  accepted  it  was  forged.  {Gibson  v.  Minet,  1  H. 
Bl.    569;  s.  c.  2   Bro.  P.  C.  48;  3  T.  R.  481;  P'niUps  v.  Im  Thurn, 


XI.]  AMBIGUOUS   SIGNATURES.  3 II 

Law  Rep.  i  C.  P.  463;  s.  c.  18  C.  B.  [N.  S.],  694.)  But  those  cases 
go  upon  the  ground  that  the  defendant's  own  acceptance  bound  him, 
so  that  he  could  not,  even  if  he  acted  in  good  faith,  dispute  the  genu- 
ineness of  the  prior  signatures.  They  do  not  hold  him  liable  upon 
those  signatures  as  his  own,  but  upon  his  own  signature  as  acceptor. 

The  plamtiff  also  cited  Lobddl  v.  Baker  (3  Met.  469),  in  which  it 
was  held  that  if  the  holder  of  a  promissory  note,  indorsed  in  blank 
bv  the  payee,  caused  it  to  be  indorsed  by  a  minor,  and  then  sold  it, 
without  erasing  this  indorsement  or  otherwise  making  it  appear  on 
the  note  to  be  without  binding  force,  he  was  liable  to  all  subsequent 
holders  upon  his  implied  representation  that  the  indorsement  con- 
stituted a  valid  contract.  But  the  action  in  that  case  was  in  tort 
for  the  false  representation.     (See  s.  c.  i  Met.  193.) 

The  plaintiff  further  contended  that  he  might  waive  the  tort  and 
sue  in  assumpsit;  for  which  he  cited  Hill  \' .  Perrott  (8  Taunt.  274); 
Biddle  v.  Levy  (i  Stark.  20);  and  Jo7ies  v.  Hoar  (5  Pick.  285).  But 
as  there  was  no  offer  to  show  that  the  defendant  had  received  any 
money  upon  the  notes,  that  rule  does  not  apply.  {Ladd  v.  Rogers, 
II  Allen,  209.) 

If  the  facts  which  the  plaintiff  offered  to  prove  were  true,  he 
would  seem  to  have  been  defrauded  by  the  act  of  the  defendant. 
But  he  must  seek  his  remedy  for  such  fraud  in  an  appropriate  form 
of  action.  He  cannot  compel  the  defendant  to  try  the  question  of 
false  representation  in  an  action  of  contract  upon  the  notes. 

We  regret  that  after  much  consideration  our  judgment  is  not 
unanimous.  It  is  the  opinion  of  a  majority  of  the  court,  that,  for 
the  reasons  above  stated,  this  action  cannot  be  maintained  upon 
either  alternative  of  the  facts  which  the  plaintiff  offered  to  prove. 
The  result  is,  that,  according  to  the  terms  of  the  report  upon  which 
the  case  was  reserved,  there  must  be 

Judgment  for  the  defendant. 


3.   Liability  of  Person  Signing  as  Agent. 

§  39  WHITE  V.  MADISON.  [§  20j 

26  New  York,  117.  —  1862. 

Action  to  recover  the  amount  of  a  promissory  note  executed  by 
the  defendant  in  this  style:  "  N.  D.  Snow,  Sh'ff  Chau.  Co.,  by  A. 
Z.  Madison,  Dep.  Sh'ff j'^  also  to  recover  the  costs  of  a  prior  action 
against  Snow  upon  the  same  note,  in  which  plaintiff  was  nonsuited 
on  the  ground  that  Madison  had  no  authority  from  the  sheriff  to 


312  INTERPRETATION.  [ART.  II. 

make  the  note.  The  note  was  given  to  insure  goods  seized  by  the 
deputy  sheriff  under  a  writ  of  attachment.  Judgment  for  plaintiff. 
Defendant  appeals. 

Selden,  J.  —  It  was  proved  on  the  trial  in  this  case  that  the 
defendant,  on  the  trial  of  the  former  action  against  the  sheriff,  testi- 
fied that  he  had  no  authority  from  the  sheriff  to  execute  in  his  name 
the  note  mentioned  in  the  complaint,  unless  that  authority  was  within 
his  general  powers  as  a  deputy  of  the  sheriff;  and  the  counsel  on 
both  sides  have  assumed  that  he  had,  as  deputy,  no  such  authority. 
It  seems  also  to  have  been  assumed  that  the  sheriff  had  no  power  to 
insure,  in  his  official  capacity,  the  goods  attached,  and  that  conse- 
quently the  deputy  could  not  insure  them  in  his  name.  The  ques- 
tion of  power  on  the  part  of  the  deputy  to  execute  the  note  in  the 
name  of  the  sheriff  does  not  depend  upon  that  position.  If  the 
deputy  had  power  to  insure  in  the  name  of  the  sheriff,  he  could  not, 
in  effecting  such  insurance,  subject  the  sheriff  to  the  hazards  of  that 
most  unsafe  of  partnerships  —  a  mutual  insurance  company.  He 
may  have  had  power  to  insure  the  sheriff's  goods  without  having 
power  to  make  Jiim  the  insurer  of  other  people's  goods.  The  latter 
power  was  attempted  to  be  exercised  when  he  made  the  note  in 
question,  and  this  was  undoubtedly  beyond  his  general  authority. 

The  defendant,  having  executed  the  note  in  the  name  of  Snow, 
without  authority,  would  be  held  liable,  according  to  several  deci- 
sions in  this  State,  as  the  maker  of  the  note.  (^Dusoihiiry  v.  Ellis,  3 
John.  Cases,  70;  IV/iitc  v.  Skinner,  13  John.  307;  Feeter  v.  HeatJi, 
II  Wend.  487;  Rossiter  v.  Rossitcr,  8  Id.  494;  Meech  v.  Smith,  7  Id. 
315;  Palmer  w  Stephens,  i  Denio,  480;  Pliiinb  x.Milk,  19  Barb.  74.) 
The  authority  of  these  cases  has  been  somewhat  shaken  by  the 
remarks  of  the  judges  who  delivered  opinions  in  the  case  of  Walker 
V.  The  Bank  of  the  State  of  New  York  (5  Seld.  582);  and  in  England, 
as  well  as  in  several  of  the  United  States,  the  principle  upon  which 
they  rest,  if  they  are  supposed  to  present  the  only  ground  of  liability 
of  the  agent,  has  been  substantially  repudiated.  {Collen  v.  JVrii^ht, 
40  Eng.  L.  and  Eq.  182;  Randell  v.  Trinien,  37  Id.  275;  LeK'is  v. 
Nicholson,  12  Id.  430;  Sniout  v.  Ilbery,  10  M.  &  W.  i;  Polhilc  v. 
Walter,  3  B.  &  Ad.  114;  Jenkins  \.  Hutchinson,  13  Ad.  &  Ellis  [N. 
S.],  744;  Long  V.  Collmrn,  11  Mass.  96;  Ballon  v.  Talbot,  16  Id.  461; 
Jeftsv.  York,  4  Cush.  371;  s.  c.  10  Id.  392;  Abbey  v.  Chase,  6  Id. 
54;  Stetson  v.  Patten,  2  Greenl.  359;  Bank  v.  Flanders,  4  N.  H. 
239;  Woodes  V.  Dennett,  9  Id.  55;  Johnson  v.  Smith,  21  Conn.  627; 
Ogden  V.  Raymond,  22  Id.  379;  Taylor  v.  Shclton,  30  Id.  122; 
Hopkins  v.  Mehaffy,  11  S.  &  R.  126;  2  Smith's  Leading  Cases,  222; 
Story  on  Agency,  §  264,  a,  and  note  i.) 


XI.]  AMBIGUOUS    SIGNATURES.  313 

If  it  were  necessary,  in  disposing  of  the  present  case,  to  decide  the 
question,  whether,  as  a  general  principle,  one  entering  into  a  contract 
in  the  name  of  another,  without  authority,  is  to  be  himself  holden  as  a 
party  to  the  contract,  I  should  hesitate  to  affirm  such  a  principle  By 
that  rule  courts  would  often  make  contracts  for  parties  which  they 
neither  intended  nor  would  have  consented  to  make.  The  contract, 
if  binding  upon  one  party,  must  be  binding  upon  both;  and  where 
burdensome  conditions  precedent  were  to  be  performed  by  the  party 
contracting  with  the  assumed  agent,  before  performance  could  be 
demanded  of  the  other  party,  or  where  the  agent  should  undertake 
to  sell,  lease  or  mortgage  the  property  of  the  assumed  principal,  or 
where  credit  should  be  given,  which  the  responsibility  of  the  agent 
would  not  justify,  great  injustice  might  result  from  such  a  rule.  In 
those  cases,  and  I  think  in  all  cases,  where  one,  pretending  to  be  an 
agent,  has  contracted  as  such  without  authority  from  the  principal, 
the  party  contracted  with,  on  learning  the  facts,  must  have  the  right 
to  repudiate  the  contract,  and  to  hold  the  assumed  agent  imme- 
diately responsible  for  damages,  without  waiting  for  the  time  when 
an  action  might  be  maintained  on  the  contract  itself ;  and  the  damages 
must  be  measured,  not  by  the  contract,  but  by  the  injury  resulting 
from  the  agent's  want  of  power.  Whenever  a  person  enters  into  a 
contract  as  agent  for  another,  he  warrants  his  own  authority,  unless 
very  special  circumstances,  or  express  agreement,  relieve  him  from 
that  responsibility.  {S:noiit  v.  Ilbery,  10  M.  &  W.  9,  10;  Polhill  ^\ 
Walter,  3  B  &  Ad.  114;  Jenkins  v.  Hiitehinson,  13  Ad.  &  Ellis  [N. 
S.],  744;  Jefts  v.  York,  10  Cush.  395;  5  Seld.  585;  Story  on  Agency, 
§  164.)  An  action  upon  such  warranty  must  always  be  appropriate 
where  personal  liability  attaches  to  an  agent,  in  consquence  of  his 
contracting  without  authority.  In  such  action  the  plaintiff  would 
be  relieved  from  the  necessity  of  showing  performance  of  conditions 
precedent,  and  from  the  delay  which  the  terms  of  the  contract  might 
require,  if  the  remedy  were  limited  to  an  action  on  the  contract;  and 
if  special  damage  should  be  incurred  in  consequence  of  the  agent's 
failure  to  bind  his  principal,  such  as  the  costs  of  an  unsuccessful 
action  against  the  principal  to  enforce  the  contract,  they  might  be 
recovered.  If  the  act  of  the  agent  were  fraudulent,  an  action  for 
the  deceit  would  lie,  but  it  would  be  a  concurrent  remedy  with  an 
action  on  the  warranty,  and  so  I  apprehend  must  be  the  action  on 
the  contract  itself,  if  the  cases  which  sustain  such  action  are  to  be 
regarded  as  correctly  decided.  In  Dusenbiiry  v.  Ellis  (3  John.  Cases, 
70),  the  leading  case  in  this  .State  sustaining  such  an  action,  it  does 
not  appear  what  time  the  note  executed  by  the  assumed  agent  had  to 
run  at  the  time  when  it  was  given.     Supposing  it  to  have  been  given 


314 


INTERPRETATION.  [ART.  II. 


payable  at  a  very  distant  day,  was  the  holder,  after  discovering  that 
Dusenbury  had  no  authority  from  Sharpe  (the  assumed  prmcipal),  to 
give  it,  bound  to  wait  until  the  note  became  due,  and  then  sue 
Dusenbury  on  the  note  as  his  contract;  or  could  he  repudiate  the 
contract  and  immediately  sue  Dusenbury  on  the  note  as  his  contract; 
or  could  he  repudiate  the  contract  and  immediately  sue  Dusenbury  on 
the  warranty  of  authority,  implied,  or  rather,  as  I  think,  expressed, 
in  the  execution  of  the  note?  There  can  be  but  one  answer  to  this 
question,  and  that  is  in  favor  of  the  right  to  repudiate  the  principal 
contract,  and  to  prosecute  on  the  subordinate  contract  of  warranty, 
whether  the  right  to  elect  between  that  course,  and  an  action  on  the 
principal  contract,  existed  or  not.  Whether  Ellis,  as  indorsee  of  the 
note,  could  have  maintained  an  action  on  the  warranty,  which  was 
made  originally  to  Fish,  the  payee,  may  be  doubtful,  unless  it 
appeared  that  the  agent  knew  he  was  acting  without  authority,  in 
which  case,  according  to  English  decisions,  he  would  be  liable  on 
the  warranty  to  anyone  receiving  the  paper;  the  representation  of 
his  authority  being  in  effect  made  to  all  to  whom  it  might  be  offered 
in  the  course  of  circulation.  (^Polhill  \.  Walter,  3  B.  &  Ad.  114.) 
If  the  party  receiving  the  note  in  the  present  case  must  be  charged, 
as  claimed  by  the  defendant's  counsel,  with  knowledge  of  the  extent 
of  defendant's  ordinary  powers  as  a  deputy  of  the  sheriff  (which  is 
very  questionable),  the  want  of  special  authority  for  this  particular 
act  was  not  communicated,  and  could  not  be  known.  The  defend- 
ant, therefore,  is  not  within  the  cases  in  which  agents  have  been 
held  excused  from  liability  for  acts  beyond  their  authority,  when 
they  have  acted  in  good  faith  and  the  facts  affecting  their  authority 
were  equally  well  known  to  both  parties.  {Sniotit  v.  Ilbery,  10  M. 
&  W.  11;  Story  on  Agency,  §§  265,  265a.) 

The  recovery  seems  to  have  proceeded,  in  the  court  below,  upon 
the  ground  that  this  was  an  action  upon  the  note.  It  is  rather,  I 
think,  to  be  regarded  as  an  action  on  the  warranty.  The  complaint 
states  all  the  facts  in  respect  to  the  making  of  the  note  by  the 
defendant  in  the  name  of  Snow;  that  he  executed  it  without 
authority,  and  that  the  company  issued  the  policy  upon  no  other 
consideration  than  the  note  and  the  advance  premium,  relying  on 
the  authority  of  the  defendant  to  execute  the  note.  It  also  set  forth 
the  proceedings  in  an  unsuccessful  suit  against  Snow  on  the  note, 
and  demands  judgment  for  the  costs  of  that  suit,  together  with  the 
full  amount  of  the  note;  the  assessments  for  losses  being  equal  to 
that  amount.  On  the  facts  stated,  the  law  implies  a  warranty  of 
authority  to  the  defendant  to  execute  the  note  for  Snow,  and  it  was 
unnecessarv,  under  our  present  system  of  pleading,  to  allege  that 


XI. j  AMBIGUOUS   SIGNATURES.  315 

legal  inference.  (^Eno  v.  Woodworth,  4  Comst.  249,  253.)  In  an 
action  on  the  note  as  the  contract  of  the  defendant,  a  claim  for  the 
costs  of  a  suit  to  enforce  the  note  against  Snow  would  be  absurd. 
The  amount  of  the  note,  less  the  assessment  paid,  was  made  the 
measure  of  damages,  as  if  the  action  had  been  upon  the  note;  but  the 
ailegations  and  proof  showed  that  the  share  of  the  losses  of  the  com- 
pany, chargeable  upon  the  note,  during  the  time  covered  by  the 
policy  prior  to  its  surrender,  was  equal  to  the  amount  of  the  note. 
That  possibly  might  be  regarded  as  a  proper  measure  of  damages 
upon  the  breach  of  warranty;  but  whether  that  be  so  or  not,  no 
question  having  been  made  before  the  jury  as  to  the  amount  of  the 
recovery,  if  the  defendant  was  liable  at  all,  none  can  be  made  now. 
[The  court  then  holds  that  the  sheriff  had  an  insurable  interest  in 
the  goods.]  The  position  of  the  defendant's  counsel  is  doubtless 
correct,  that  if  the  sheriff  was  authorized  to  insure  the  goods,  the 
deputy  who  seized  them  might  insure  them  in  his  name,  but  this 
power,  for  the  reasons  given  above,  did  not  authorize  the  deputy 
to  give  the  note  in  question. 

[Omitting  a  point  immaterial  to  the  question  here  presented.] 
If  the  action  were  to  be  regarded  as  brought,  and  the  recovery 
had,  upon  the  note,  it  might  be  doubtful  whether  the  judgment  could 
be  sustained,  because  the  plaintiff  has  neither  alleged  nor  proved 
enough  to  show  to  the  court  that  the  defendant  was  in  default  in 
paying  the  note,  regarding  it  as  his  personal  obligation.  By  the 
terms  of  the  note,  it  was  payable  "  at  such  time  or  times  as  the 
directors  of  said  company  may,  agreeably  to  their  act  of  incorpora- 
tion, require.''  The  act  of  incorporation  here  referred  to  is  the 
charter  of  the  company  which  the  statute  requires  the  original  cor- 
porators to  make  and  file  in  the  office  of  the  Secretary  of  State. 
(Laws  of  1849,  ch.  308,  §§  3,  10,  12,  16.)  There  does  not  seem  to 
be  anything  in  the  statute  under  which  the  company  was  organized 
to  which  the  reference  could  be  held  applicable.  Neither  the  plead- 
ings nor  the  proofs  show  what  the  provisions  of  the  charter  of  the 
Union  Insurance  Company  were,  and  consequently  it  does  not  appear 
whether  the  maker  of  the  note  was  in  default  or  not.  The  allega- 
tions in  the  complaint  of  notice  of  assessment  by  publication  and  by 
mail  are  put  in  issue  by  the  answer;  and  if  we  could  assume  that 
those  allegations  indicated  correctly  what  was  required  by  the 
charter  to  charge  the  parties  assessed,  there  is  an  entire  want  of 
proof  on  the  subject.  This  objection  is  distinctly  presented  by  the 
third  ground  of  the  defendant's  motion  for  a  nonsuit;  and  if  the 
plaintiff  was  confined  to  a  recovery  on  the  note,  I  think  this  objection 


3i6  INTERPRETATION.  [ART.   II. 

would   be  latal  tj  his  action;  but,  regarding  the  liability  as  depend- 
ing on  the  warranty,  no  assessment  or  notice  was  necessary. 

Several  objections  were  taken  by  the  defendant  to  the  introduction 
of  testimony;  but,  with  the  exception  of  those  relating  to  the  action 
against  Snow,  they  are  so  clearly  untenable  as  not  to  require  notice. 
If  this  action  was  to  be  regarded  as  an  action  simply  to  charge  the 
defendant  as  the  maker  of  the  note,  the  record  in  the  case  of  Snow 
would  not  have  been  admissible  against  the  defendant.  Assuming 
that  it  was  incumbent  upon  the  plaintiff  to  show  that  the  defendant 
was  not  authorized  to  make  the  note  for  Snow  (19  Barb.  74),  this 
record,  to  which  the  defendant  was  a  stranger,  was  not  admissible 
to  prove  that  fact,  or  as  having  any  tendency  to  prove  it,  though  it 
might  have  been  otherwise  if  seasonable  notice  had  been  given  to 
the  defendant  that  his  authority  to  make  the  note  for  Snow  was 
denied  in  that  suit,  and  requiring  him  to  maintain  his  authority  on 
the  trial.  (2  Cow.  &  Hill's  Notes,  817.)  If  the  record  was  inadmis- 
sible, the  parol  evidence  of  the  grounds  on  which  the  decision  pro- 
ceeded was  equally  so.  Nor  was  the  record  necessary  to  authorize 
the  introduction  of  proof  of  what  the  defendant  testified  to  on  that 
trial,  showing  his  want  of  authority.  What  he  said  in  the  witness- 
bo.K  was  admissible  against  him,  as  declarations  made  at  any  other 
time  would  be,  without  reference  to  his  oath  or  to  the  issues  in  the 
record.  But,  resting  the  plaintiff's  right  of  recovery,  as  I  do,  upon 
the  warranty,  the  record  was  admissible  to  show  that  the  plaintiff 
had  been  subjected  to  the  expenses  of  an  action  in  attempting  to 
enforce  the  contract  against  the  principal,  whom  the  defendant 
undertook  to  bind.  These  expenses  —  the  action  being  brought  in 
good  faith  —  were  a  legitimate  item  of  damages  in  the  present  action. 
{Randt'Il  v.  Trime/i,  37  L.  &  E.,  275;  s.  c,  86  Eng.  C.  L.  786;  Cone?i 
V.  Wright,  40  L.  &:  E.  182);  and  the  parol  evidence  was  admissible 
to  rebut  a  possible  inference  that  the  nonsuit  was  granted  on  account 
of  some  formal  defect  in  the  prosecution  of  the  action.  It  is  always 
competent  to  show  by  parol  the  grounds  on  which  a  verdict  or  judg- 
ment was  rendered,  when  the  grounds  become  material,  and  do  not 
appear  in  the  record.  {Wood  x.  Jackson,  8  Wend.  10-45;  -^''0'  v. 
Browji,  4  Comst.  71-75.)     The  judgment  should  be  affirmed. 

Denio,    Ch.    J  ,    Davies,   Wright    and    Gould,    JJ.,   concurred. 
Allen,  J.,  dissented. 

Judgment  affirmed.' 


1  Accord:  Bcltzen  v.  Nicolay,  53  N.  Y.  467;  Taylor  v.  Nostrand,  134  N.  Y.  loS; 
Bartlett  V.  Tucker,  104  Mass.  336,  ante,  p.  306;  Taylor  v.  Shelton,  30  Conn.  122; 
Kroeger  v.  Pitcairn,  loi  Pa.  St.  311;   Huffcut  on  Agency,  §  1S3. 

It  will  be  observed  that  the  language  of  the  Neg.  Inst.  Law  (§  39  [20]  ),  seems 


Foster  &  Cole, 
General  Agents 

for  the 
New  England 

States, 

15  Devonshire 

Street, 

Boston. 


XI.]  AMBIGUOUS    SIGNATURES.  317 

§  39  CHIPMAX  r.   FOSTER  et  al.  [§  20] 

119  Massachusetts,  189.  —  1875. 

Contract  against  the  defendants  as  drawers  of  three  drafts 
indorsed  in  blank  by  the  payees,  of  which  the  following  is  a  copy:  — 

No.  176.  $5,000. 

Ni:w  England  Agency  of  the    Pennsylvanla    Fire  Insur- 
ance  Company,  Philadelphia. 

Boston,  August  18,  1S73. 
Paj'  to  the  order  of  Haley,  Morse  &  Company,  five  thou- 
sand dollars,  being  in  full  of  all  claims  and  demands  against 
said  company  for  loss  and  damage  by  fire  on  the  thirtieth  day 
of  Ma}",  1S73,  t^o  property  insured  undsr  policy  No.  S24,  of 
Boston,  Mass.,  agency. 

Foster  &  Cole. 
To  the  Pennsylvania  Fire  Insurance  Company,  Philadelphia. 

Defendants  were  general  agents  of  the  Pennsylvania  Fire  Insurance 
Company  of  Philadelphia,  and  drew  the  drafts  in  question  in  pay- 
ment of  three  policies  issued  by  that  company.  The  company 
refused  to  honor  the  drafts,  and  they  were  duly  protested. 

Gray,  C.  J.,  —  Each  of  these  drafts,  upon  its  face,  purports  to  be 
issued  by  the  New  England  agency  of  the  Pennsylvania  Fire  Insur- 
ance Company,  and  shows  that  Foster  &  Cole  are  the  general  agents 
of  that  corporation  far  the  New  England  States,  as  well  as  that  the 
draft  is  drawn  in  payment  of  a  claim  against  the  corporation.  It 
thus  appears  that  Foster  &  Cole,  in  drawing  it,  acted  only  as  agents 
of  the  corporation,  as  clearly  as  if  they  had  repeated  words  express- 
ing their  agency  after  the  signature;  and  they  cannot  be  held  per- 
sonally liable  as  drav/ers  thereof.  {Carpenter  v.  Farnsiuorth^  106 
Mass.  561),  and  cases  cited. 

Judgment  for  the  defendants.' 


§  39  CASCO  NATIONAL  BANK  v.  CLARK.  [§  20] 

139  New  York,  307.  —  1893.  ' 

Action  against  defendants  as  makers  of  a  promissory  note.  Judg- 
ment for  plaintiff.     The  opinion  states  the  facts. 

to  imply  that  if  the  agent  is  not  duly  authorized  he  will  be  liable  on  the  instru- 
ment; bat  it  is  open  to  question  whether  the  courts  would  change  a  well-estab- 
lished rule  of  law  upon  a  negative  implication. 

A  few  courts  hold  an  agent  liable  upon  the  instrument  when  he  signs  in  the 
capacity  of  an  agent,  but  without  authority.  Dale  v.  Donaldson,  48  Ark.  188; 
Weave  v.  Gove,  44  N.  H.  196.  —  En. 

'Accord:  Mechanics'  Bank  v.  Bank  of  Columbia,  5  Wheat.  (U.  S.)  326;  Hitch- 
cock  V.  Buchanan,  105  U.  S.  416.  —  Ed. 


3l8  INTERPRETATION.  [ART.  II. 

Gray,  J.  — The  action  is  upon  a  promissory  note,  in  the  following 
form,  viz. : 

^  Brooklyn-,  N.  Y.,  August  2,  1890. 

$7,500.  Three  months  after  date,  we  promise  to  pay  to  the  order  of  Clark  & 
Chaplin  Ice  Company,  seventy-five  hundred  dollars  at  Mechanics'  Bank: 
value  received. 

John  Clark,  Frest. 
E    H.  Close,   Trcas. 

It  ^vas  delivered  in  payment  for  ice  sold  by  the  payee  company  to 
the  Ridgewood  Ice  Company,  under  a  contract  between  those  com- 
panies, and  was  discounted  by  the  plaintiff  for  the  payee,  before  its 
maturity.  The  appellants,  Clark  and  Close,  appearing  as  makers 
upon  the  note,  the  one  describing  himself  as  "  Prest."  and  the  other 
as  "  Treas.,"  were  made  individually  defendants.  They  defended 
on  the  ground  that  they  had  made  the  note  as  officers  of  the  Ridge- 
wood Ice  Company,  and  did  not  become  personally  liable  thereby 
for  the  debt  represented. 

Where  a  negotiable  promissory  note  has  been  given  for  the  pay- 
ment of  a  debt  contracted  by  a  corporation,  and  the  language  of  the 
promise  does  not  disclose  the  corporate  obligation,  and  the  signa- 
tures to  the  paper  are  in  the  names  of  individuals,  a  holder,  taking 
bona  fide,  and  without  notice  of  the  circumstances  of  its  making,  is 
entitled  to  hold  the  note  as  the  personal  undertaking  of  its  signers, 
notwithstanding  they  affix  to  their  names  the  title  of  an  office.  Such 
an  affix  will  be  regarded  as  descriptive  of  the  persons  and  not  of  the 
character  of  the  liability.  Unless  the  promise  purports  to  be  by 
the  corporation,  it  is  that  of  the  persons  who  subscribe  to  it;  and 
the  fact  of  adding  to  their  names  an  abbreviation  of  some  official  title 
has  no  legal  signification  as  qualifying  their  obligation,  and  imposes 
no  obligation  upon  the  corporation  whose  officers  they  may  be. 
This  must  be  regarded  as  the  long  and  well-settled  rule.  (Byles  on 
Bills,  §§36,  37,  71;  Pentzv.  Stanton,  10  Wend.  271;  Taftx.  Brewster, 
9  John.  334;  Hills  v.  Bannister,  8  Cow.  31;  Moss  v.  Livingston,  4 
N.  Y.  208;  DeWitt  v.  Walton,  9  Id.  571;  Bottomley  v.  Fisher,  i 
Hurlst.  &  Colt.  211.)  It  is  founded  in  the  general  principle  that  in 
a  contract  every  material  thing  must  be  definitely  expressed,  and  not 
left  to  conjecture.  Unless  the  language  creates,  or  fairly  implies, 
the  undertaking  of  the  corporation,  if  the  purpose  is  equivocal,  the 
obligation  is  that  of  its  apparent  makers. 

It  was  said  in  Briggs  v.  Partridge  (64  N.  Y.  357,  363),  that  persons 
taking  negotiable  instruments  are  presumed  to  take  them  on  the 
credit  of  the  parties  whose  names  appear  upon  them,  and  a  person 


XI.]  AMBIGUOUS    SIGNATURES.  319 

not  a  party  cannot  be  charged,  upon  proof  that  the  ostensible  party 
signed,  or  indorsed,  as  his  agent.  It  may  be  perfectly  true,  if  there 
is  proof  that  the  holder  of  negotiable  paper  was  aware,  when  he 
received  it,  of  the  facts  and  circumstances  connected  with  its  mak- 
ing, and  knew  that  it  was  intended  and  delivered  as  a  corporate 
obligation  only,  that  the  persons  signing  it  in  this  manner  could  not 
be  held  individually  liable.  Such  knowledge  might  be  imputable 
from  the  language  of  the  paper,  in  connection  with  other  circum- 
stances, as  in  the  case  of  Mott^,  Hicks  (i  Cow.  513),  where  the  note 
read,  "  the  president  and  directors  promise  to  pay,"  and  was  sub- 
scribed by  the  defendant  as  "  president."  The  court  held  that  that 
was  sufficient  to  distinguish  the  case  from  Taft  v.  Brewster,  supra, 
and  made  it  evident  that  no  personal  engagement  was  entered  into 
or  intended.  Much  stress  was  placed  in  that  case  upon  the  proof 
that  the  plaintiff  was  intimately  acquainted  with  the  transaction  out 
of  which  arose  the  giving  of  the  corporate  obligation. 

In  the  case  of  Bank  of  Genesee  v.  Patchin  Bank  (19  N.  Y.  312), 
referred  to  by  the  appellant's  counsel,  the  action  was  against  the 
defendant  to  hold  it  as  the  indorser  of  a  bill  of  exchange,  drawn  to 
the  order  of  "  S.  B.  Stokes,  Cas.,"  and  indorsed  in  the  same  words. 
The  plaintiff  bank  was  advised,  at  the  time  of  discounting  the  bill, 
by  the  president  of  the  Patchin  Bank,  that  Stokes  was  its  cashier, 
and  that  he  had  been  directed  to  send  it  in  for  discount,  and  Stokes 
forwarded  it  in  an  official  way  to  the  plaintiff.  It  was  held  that  the 
Patchin  Bank  was  liable,  because  the  agency  of  the  cashier  in  the 
matter  was  communicated  to  the  knowledge  of  the  plaintiff  as  well 
as  apparent. 

Incidentally,  it  was  said  that  the  same  strictness  is  not  required 
in  the  execution  of  commercial  paper  as  between  banks,  that  is,  in 
other  respects,  between  individuals. 

In  the  absence  of  competent  evidence  showing  or  charging  knowl- 
edge in  the  holder  of  negotiable  paper  as  to  the  character  of  the 
obligation,  the  established  and  safe  rule  must  be  regarded  to  be  that 
it  is  the  agreement  of  its  ostensible  maker  and  not  of  some  other 
party,  neither  disclosed  by  the  language,  nor  in  the  manner  of  exe- 
cution. In  this  case  the  language  is,  "  we  promise  to  pay,"  and  the 
signature  by  the  defendants,  Clark  and  Close,  are  perfectly  con- 
sistent with  an  assumption  by  them  of  the  company's  debt. 

The  appearance  upon  the  margin  of  the  paper  of  the  printed  name 
"  Ridgewood  Ice  Company  "  was  not  a  fact  carrying  any  presumption 
that  the  note  was,  or  was  intended  to  be,  one  by  that  company. 

It  was  competent  for  its  officers  to  obligate  themselves  per- 
sonally, for  any  reason  satisfactory  to  themselves,  and,   apparently 


320  INTERPRETATION.  [ART.   II. 

to  the  world,  they  did  so  by  the  language  of  the  note;  which  the 
mere  use  of  a  blank  form  of  note,  having  upon  its  margin  the  name 
of  their  company,  was  insufficient  to  negative. 

[The  court  then  decides  that  the  fact  that  one  Winslow  was  a 
director  in  the  pavee  company,  and  also  in  the  plaintiff  bank,  did 
not  charge  the  latter  with  notice  as  to  the  origin  of  the  paper.] 

Judgment  affirmed.' 

§  40  [21  j  Stagg  v.  Elliott,  12  Common  Bench,  N.  S.  373.  — 
1862.  Bill  accepted  "per  pro.  William  Elliott,  George  Elliott." 
George  was  the  son  of  the  defendant,  William,  and  manager  of  his 
business.  Bvles,  J.  —  The  words  "  per  procuration  "  are  an  express 
statement  that  the  party  accepting  the  bill  has  only  a  special  and 
limited  authority,  and  therefore  a  person  who  takes  a  bill  so 
accepted  is  bound  at  his  peril  to  enquire  into  the  extent  and  nature 
of  the  agent's  authority.  It  is  not  enough  to  show  that  other  bills 
similarly  accepted  or  endorsed  have  been  paid,  although  such  evi- 
dence, if  the  acceptance  were  general  by  an  agent  in  the  name  of 
a  principal,  would  be  evidence  of  a  general  authority  to  accept  in  the 
name  of  the  principal.  .  .  .  The  result  of  the  decisions  seems 
to  be  this,  that  the  way  in  which  this  bill  was  accepted  is  the  legiti- 
mate way  of  showing  the  fact  that  the  acceptor  has  only  a  special 
and  limited  authority.  Further,  it  is  to  be  observed,  that  this  rule 
depends  upon  the  law-merchant,  which  extends  over  Europe  and 
America;  and  this  is  the  way  in  which  it  is  understood  all  over  the 
world. 

§  40  [21]  The  Floyd  Acceptances,  7  Wallace  (U.  S.),  666.  — 
1868.  Mr.  Justice  Miller.  — An  individual  may,  instead  of  sign- 
ing, with  his  own  liand,  the  notes  and  bills  which  he  issues  or  accepts, 
appoint  an  agent  to  do  these  things  for  him.  And  this  appointment 
may  be  a  general  power  to  draw  or  accept  in  all  cases  as  fully  as  the 

'  Accord:  First  K.  B.  v.  Wallis,  150  N.  Y.  .^55;  Collins  v.  Buckeye',  etc.,  Co.,  17 
Oh.  St.  215.  There  is  a  clear  distinction  between  makers,  drawers,  and  accept- 
ors, on  the  one  hand,  and  indorsers  on  the  other.  An  indorsement  being  neces- 
sar\^  to  transfer  title  a  payee  designated  as  "A.  B.  agent  "  may  indorse  in  that 
form  without  becoming  liable  as  indorser.  Huffcut  on  Agency,  §  194;  Bahcock 
V.  Beman,  i  E.  D.  Smith  (N.  Y.)  593;  Souhegan  Nat.  Bk.  v.  Boardman,  46 
Minn.  293;  Vatcr  v.  Lc'7ms,  36  Ind.  288;  First  N^at.  Bk.  v.  Hall,  44  N.  Y.  395; 
Falkv.  Mocbs,  127  U.  S.  597.  See  especially  the  statement  in  Collins  v.  Buck- 
t\ve,  etc.,  Co.,  17  Oh.  St.  215.  The  rule  is  especially  liberal  in  favor  of  cashiers 
who  indorse  instruments  drawn  to  their  order,  as,  "  pay  to  the  order  of  A.  B. 
cashier."  Bank  of  Genesee  v.  Patchin  Bank,  19  N.  Y.  312;  Folger  v.  Chase,  18 
Pick.  (Mass.)  63,  post.  Neg.  Inst.  L..  §  72  [42],  post,  which  extends  the  liberal 
rule  to  a'  'cashier,  or  other  fiscal  officer  of  a  bank  or  corporation."  —  En. 


XI.]  AMBIGUOUS   SIGNATURES.  321 

principal  could;  or  it  may  be  a  limited  authority  to  draw  or  accept 
under  given  circumstances,  defined  in  the  instrument  which  confers 
the  power.  But,  in  each  case,  the  person  dealing  with  the  agent, 
knowing  that  he  acts  only  by  virtue  of  a  delegated  power,  must,  at 
his  peril,  see  that  the  paper  on  which  he  relies  comes  within  the 
power  under  which  the  agent  acts.  And  this  applies  to  every  person 
who  takes  the  paper  afterwards;  for  it  is  to  be  kept  in  mind  that  the 
protection  which  commercial  usage  throws  around  negotiable  paper, 
cannot  be  used  to  establish  the  authority  by  which  it  was  originally 
issued.  These  principles  are  well  established  in  regard  to  the  trans- 
actions of  individuals.  They  are  equally  applicable  to  those  of  the 
government.  Whenever  negotiable  paper  is  found  in  the  market 
purporting  to  bind  the  government,  it  must  necessarily  be  by  the 
signature  of  an  officer  of  the  government,  and  the  purchaser  of  such 
paper,  whether  the  first  holder  or  another,  must,  at  his  peril,  see  that 
the  officer  had  authority  to  bind  the  government. 


§  40  [21]  Nixon  v.  Palmer,  8  New  York,  398.  —  1853.  Bill 
accepted  "Jeremiah  G.  Palmer,  by  James  L.  Palmer."  Defense, 
want  of  authority.  Mason,  J.  —  "  The  bill  being  on  its  face 
accepted  by  James  L.  Palmer  for  the  defendant,  was  notice  that  he 
professed  to  act  under  an  authority,  and  imposed  upon  the  plaintiffs 
the  duty  of  ascertaining  that  he  acted  within  it." 


4.  Indorsement  by  Infant  or  Coporation, 

§  41  FRAZIER  V.  MASSEY.  [§  22] 

14  Indiana,  382.  —  i860. 

Worden,  J.  —  Action  by  Massey  against  the  appellants  upon  a 
promissory  note  made  by  the  latter  to  William  T.  Hess,  and  by  Hess 
indorsed  to  the  plaintiff. 

Answer  that  said  William  T.  Hess,  the  payee  of  the  note,  was,  at 
the  time  he  indorsed  it  to  the  plaintiff,  a  minor  under  the  age  of 
twenty-one  years;  wherefore,  etc. 

To  this  answer  a  demurrer  was  sustained,  and  the  plaintiff  had 
judgment. 

The  ruling  on  the  demurrer  raises  the  only  question  involved  in 
the  case. 

We  think  it  clear  that  the  demurrer  was  correctly  sustained  to  the 
answer.  The  disability  of  an  infant  to  make  a  valid,  binding  con- 
tract, is  a  personal  privilege  intended  for  the   benefit  of  the  infant 

NEGOT.   INSTRUMENTS  —  21 


322  INTERPRETATION.  [ART.  II. 

himself,  and  none  but  he,  or  his  representatives,  can  take  advantage 
of  such  disability,  (i  Pars.  Cent.  275.)  Besides  this,  the  defendants, 
by  making  the  note  to  Hess,  asserted  to  the  world  his  competency 
to  negotiate  and  assign  the  paper,  and  they  cannot  be  permitted  to 
gainsay  the  assertion  so  made.'  (Edw.  on  Bills,  p.  250;  Story  on 
Prom.  Notes,  §  80,  5th  ed.) 

Per  Curiam.  —  The  judgment  is  affirmed  with  6  per  cent,  damages 
and  costs. 


5.   Forged  Signatures. 
§  41  LANCASTER  ?•.  BALTZELL.  [§  23] 

7  Gill  &  Johnson  (Md.),  46S.  —  1S36. 

Action  by  indorsee  against  maker.  Judgment  for  plaintiff. 
Defendant  appeals.     The  facts  appear  in  the  opinion. 

Buchanan,  Ch.  J.,  delivered  the  opinion  of  the  court.  A  bill  or 
note  payable  to  order  can  only  be  transferred  by  endorsement;  and 
as  an  action  against  the  acceptor  or  drawer  can  only  be  sustained 
by  one  who  has  legal  title,  which  cannot  be  derived  through  the 
medium  of  forgery,  it  is  incumbent  on  the  plaintiff  in  such  an  action 
to  show  his  interest  in  the  bill  or  note,  which  must  be  done  by 
proving  that  it  was  endorsed  by  the  person  to  whom,  or  to  whose 
order,  it  is  made  payable. 

This  is  an  action  by  the  second  indorsee  against  the  maker  of  a 
promissory  note,  payable  to  the  payee  or  order,  which  was  resisted 
at  the  trial  on  the  ground,  that  the  first  endorsement,  purporting  to 
be  by  the  payee  was  a  forgery,  of  which  proof  was  offered  by  the 
defendant.  On  the  part  of  the  plaintiffs,  it  was  proved,  that  the 
defendant  on  being  called  on  by  their  counsel,  after  the  endorsement 
to  them,  to  pay  the  note,  examined  it,  and  said  it  was  right,  and  he 
would  settle  it  with  them.  Upon  which  the  court  instructed  the 
jury  that  if  they  believed  the  defendant,  when  the  note  was  pre- 
sented to  him  by  the  counsel  of  the  plaintiffs,  had  examined  the 
endorsements  and  said  it  was  right,  the  plaintiffs  were  entitled  to 
recover,  although  they  might  believe  the  endorsement  of  the  payee's 
name  had  been  forged,  and  notwithstanding  that  acknowledgment 
had  been  made,  after  the  transfer  of  the  note  by  these  endorsements 
to  them;  on  an  exception  to  which  instruction  the  case  is  brought  up. 

'See  Neg.  Inst.  L.,  §  no  [60].  A  second  indorser  cannot  deny  the  compe- 
tency of  the  first  indorser.     Prescott  Bank  v.  Caverly,  7  Gray  (Mass.)  271.  —  Ed. 


XL]  AMBIGUOUS    SIGNATURES.  323 

Apart  from  the  alleged  conversation  between  the  defendant  and 
the  counsel  of  the  plaintiffs,  it  is  very  clear  that  the  plaintiffs  are  not 
entitled  to  recover,  if  the  first  endorsment  in  the  name  of  the  payee 
of  the  note  was  forged;  as  the  title  was  not  and  could  not  thereby  be 
transferred, but  continued  in  the  payee,  who  on  obtaining  possession 
of  the  note,  might  sue  upon  it,  and  recover  against  the  maker,  not- 
withstanding he  should  have  paid  it  to  him,  into  whose  hands  it  came, 
through  the  medium  of  forgery;  for  besides  that  in  such  case  the 
payee  has  not  parted  with  his  title,  the  payee  of  a  note  whose  name  is 
forged  knows  nothing  of  it,  and  the  maker  before  he  pays  it  to  the 
holder  as  endorsee  should  look  carefully  to  the  endorsements.  And 
if  one  is  to  suffer,  the  loss  should  fall  on  him  who  is  most  in  fault, 
or  most  negligent. 

The  only  question  then,  in  this  case  is,  whether,  if  after  the 
endorsements  had  been  made,  the  defendant,  on  the  note  being  pre- 
sented to  him  by  the  counsel  of  the  plaintiffs,  examined  the  endorse- 
ments and  said  it  was  right,  that  makes  any  difference.  And  we 
think  it  does  not.  By  saying  so,  he  gave  no  credit  to  the  note;  and 
did  not  thereby  induce  the  plaintiffs  to  take  it.  That  had  been  done 
before,  and  not  on  the  faith  of  what  he  said.  The  plaintiffs  might 
before  they  took  the  note  have  inquired  whether  the  first  endorse- 
ment was  by  the  payee  or  not,  and  not  having  done  so,  they  must 
abide  by  the  consequence  and  cannot  throw  the  loss  upon  the 
defendant,  who  had  done  nothing  to  mislead  them  or  induce  them 
to  take  the  note;  and  who  if  made  to  pay  the  amount  in  this  action, 
may  be  made  to  pay  it  over  again  by  the  payee,  whose  right  remains 
unimpaired. 

It  is  not  like  the  case  of  a  drawee  of  a  bill,  who  if  on  being  asked 
if  the  acceptance  is  in  his  handwriting,  says  that  it  is  and  that  it 
will  be  duly  paid,  cannot  afterwards  set  up  as  a  defense  the  forgery 
of  his  name;  because  by  saying  so  he  has  accredited  the  bill  and 
induced  another  to  take  it,  which  being  his  own  fault  the  loss  ought 
to  fall  on  him,  and  not  on  another,  who  has  been  induced  to  take 
the  bill  on  the  faith  of  his  assurance.' 

Judgment  reversed.' 


'Nor  like  the  case  of  a  drawee  who  accepts  or  pays  a  bill  upon  which  the 
drawer's  name  is  forged.  See  National  Park  Bk.  v.  Nmth  Nat.  Bk.,  46  N.  Y. 
77,  post.  —  Ed. 

'  Money  paid  to  a  holder  deriving  title  through  a  forged  indorsement  may  be 
recovered  back.  Chambers  v.  Union  Bank,  78  Pa.  St.  205;  Espy  v.  Cincinnati 
Bank,  18  Wall.  (U.  S.)  604;  HoltM.  Ross,  54  N.  Y.  472;  Green  v.  Purcell  N.  B. 
(Ind.  Ter.),  37  S.  W.  Rep.  50.  Contra:  London,  etc..  Bank  v.  Bank  of  Liverpool, 
(1896),  I  Q.  B.  D.  7.  —  Ed. 


324  INTERPRETATION.  [ART.  II. 

§  42  [23]  Wellington  v.  Jackson,  121  Massachusetts,  157. — 
(1S76).  Gray,  C.  J.  —  "  Althougjli  the  signature  of  Edward  H. 
Jackso.i  was  forged,  yet  if,  knowing  all  the  circumstances  as  to  that 
signature,  and  intending  to  be  bound  by  it,  he  acknowledged  the 
signature  and  thus  assumed  the  note  as  his  own,  it  would  bind  him, 
just  as  if  it  had  been  originally  signed  by  his  authority,  even  if  it 
did  not  amount  to  an  estoppel  in  pais.  {Greenfield  Bank  v.  Crafts.,  4 
Allen,  447;   Bartlett  v.    Tucker.,   104  Mass.  336,  341.)  "  ' 

^Accord:  Howard  v.  Duinaii,  3  Lansing  (N.  Y.)  174;  Hcfnc.  v.  Vatidolah,  62 
111.  483.  But  non-repudiation  is  not  conclusive  evidence  of  ratification. 
Traders'  N.  B.  v.  Rogers,  167  Mass.  315.  Contra:  Brook  v.  Hook,  L.  R.  6  Ex. 
89;  Workman  v.  IVright,  33  Oh.  St.  405;  Henry  v.  Heeb,  114  Ind.  275;  Henry 
Christian,   etc..  Association  v.    Walton,  181   Pa.  St.  201;    Owsley  v.  Philips,  78   Ky. 

5x7- 

While  there  is  a  sharp  conflict  of  authority  as  to  the  possibility  of  ratifying  a 
forgery,  all  of  the  cases  agree  that  one  may  by  his  admissions  or  conduct  estop 
himself  from  denying  the  genuineness  of  his  signature  as  against  one  who  has 
changed  his  legal  position  relying  on  such  admissions,  representations,  or  con- 
duct. Huffcut  on  Agency,  §  43;  cases  supra;  Lancaster  v.  Baltzell,  ante^ 
p.  322.  —  Ed. 


ARTICLE  III. 

Consideration  of  Negotiable  Instruments. 


I.  Presumption  of  consideration. 

§  50  BRISTOL  V.  WARNER.  [§  24I 

19  Connecticut,  7. — 1S4S. 

Assumpsit  on  the  following  instrument: 

"  On  demand,  after  my  decease,  I  promise  to  pay  Josiah  W. 
Bristol,  or  order,  eight  hundred  and  fifty  dollars,  without  interest." 

The  making  of  the  instrument  being  admitted,  the  plaintiff  intro- 
duced the  instrument  in  evidence  and  rested  his  case.  The  court 
charged  that  the  note  imported  on  its  face  a  valuable  consideration; 
that  it  was  a  promissory  note  and  not  a  testamentary  paper.  Con- 
flicting evidence  was  given  as  to  the  consideration.  Verdict  for 
plaintiff. 

Church,  Ch.  J.  — •  i.  The  question  first  presented  by  this  motion, 
is,  whether  the  note  in  controversy  imports,  on  its  face,  a  valuable 
consideration  ?  We  think  it  does;  and  that  the  charge  to  the  jury 
on  this  point  was  correct.  It  has  now  become  the  settled  law  of 
this  state,  after  a  time  of  some  doubt,  that  a  promissory  note  not 
negotiable,  and  not  purporting  on  its  face  to  be  for  value  received, 
does  not  imply  a  consideration;  and  that  a  plaintiff,  prosecuting 
such  a  note,  is  left  to  prove  one,  or  fail  to  recover.'  (^Edgerion  v. 
Edgerton,  8  Conn.  R.  6.) 

But  this  note  is,  in  form,  negotiable,  though  not  yet  negotiated; 
and  no  consideration  is  expressed  in  it.  And  therefore,  it  was 
claimed  at  the  trial,  that  it  should  be  treated  as  if  it  were  not  nego- 
tiable paper;  —  that  it,  being  a  simple  contract,  and  as  yet  confined 
in  its  operation  to  the  original  parties  to  it,  required  proof  of  con- 
sideration. But  we  believe  that  the  negotial)ility  of  the  note  gave 
it  a  character  and  a  credit  at  its  inception,  then  importing  a  con- 
sideration, as  well  between  payer  and  payee,  as  between  the  maker 
and  indorsers  or  subsequent  holders.     We  suppose  this  court  so 

'  Contra:  Carmvri^'/U  v.  Gray,  127  X.  Y.  ()2,  post.  But  see  Neg.  Inst.  L.,  i;  320 
[184]. -Ed.  " 

[325] 


326  CONSIDERATION.  [ART.   III. 

regarded  it  in  the  case  of  Camp  v.  To/npkius  (9  Conn.  R.  445),  in 
which  it  is  said,  that  such  instruments,  as  well  as  bills  of  exchange, 
from  their  very  nature,  import  a  consideration.  Our  statute  makmg 
a  certain  description  of  notes  negotiable,  intended  to  give  to  them 
the  same  effect  here,  as  such  paper  was  known  to  have  in  England, 
and  in  the  commercial  community  generally.  The  most  respectable 
elementary  writers  upon  this  branch  of  the  law,  treat  this  as  a  well- 
established  principle.  Mr.  Chitty  says:  "  In  the  case  of  bills  of 
exchange  and  promissory  notes,  they  are  presumed  to  /ia7'c'  been  on 
good  consideration;  and  it  is  not  necessary  for  the  plaintiff  to 
state  any  in  his  declaration,  or  prove  it,  in  the  first  instance,  on  the 
trial,  etc."  Evans,  in  his  learned  commentary  on  Pothier,  remarks, 
that  "  the  case  of  bills  of  exchange  and  promissory  notes  affords, 
in  some  degree,  an  exception  to  the  general  rule,  which  has  been 
under  discussion,  when  they  are  indorsed  over  for  a  valuable  con- 
sideration; the  want  of  consideration,  between  the  original  parties 
is  immaterial;  as  between  them  a  consideration  is  presumed;  but  if 
the  contrary  is  shown  it  is  a  sufficient  defense."  Chancellor  Kent, 
in  his  commentaries,  speaks  thus:  "It  is  usual  to  insert  value 
?-ceeived  m  a  bill  or  note;  but  this  is  unnecessary,  and  value  is  implied 
in  every  bill,  note,  or  indorsement."  (Chitty  on  Bills,  67;  2  Pothier 
on  Obligations,  22;  3  Kent's  Com.  50;  i  Stephen's  N.  P.  766; 
Goshen  ^  Minisink  Turn.  Co.  x.Hurtin^  9  Johns.  R.  217;  Alandeville 
V.  Welch,  5  Wheat.  277;  2  Mci^ean,  212.)  And  yet,  there  is  an 
essential  difference  between  promissory  notes  before  they  are 
indorsed,  and  afterwards,  in  respect  to  their  original  consideration. 
In  the  former  case,  a  consideration  is  implied,  but  may  be  denied 
in  defense;  while  in  the  latter,  only  in  special  cases;  it  cannot  be 
disputed  if  the  holder  be  a  meritorious  one,  receiving  the  paper 
before  due. 

§  23  [4.]  ~.  It  is  said  that  this  paper  is  merely  testamentary, 
and  should  have  been  proceeded  with,  as  such,  in  the  probate  court. 
We  see  nothing  of  this  character  attached  to  it,  either  upon  its  face, 
or  from  the  circumstances  claimed  to  have  been  connected  with  its 
execution.  To  be  sure,  it  is  payable  after  the  death  of  the  maker; 
but  this  alone  does  not  constitute  it  a  will.  Notwithstanding  this, 
it  is  only  what  it  purports  to  be  —  a  promissory  note.  It  is  an  obliga- 
tion to  pay;  it  was  delivered  to  the  payee,  as  an  evidence  of  debt; 
and  it  is  made  payable  to  order,  as  a  negotiable  and  irrevocable 
instrument.  {Biiri:;h  v.  Preston,  8  Term  R.  483,  486;  Roffey  v. 
Greenwell,  10  Ad.  &  El.  222;  37  E.  C.  L.  99;  Stein  et  al.  v.  North, 
3  Yeates,  324;    Toner  v.  Haggart,  5   Binn.  490.) 


II.]  PRE-EXISTING   DEBT.  327 

There  are  a  few  cases,  in  which  papers,  not  strictly  testamentary 
in  their  object,  have,  however,  been  treated  as  such,  when  other- 
wise they  would  entirely  fail  of  effect;  and  we  recollect  no  case, 
nor  do  we  know  of  any  good  reason,  why  an  instrument  intended 
as  obligatory  mter  vivos  should  be  construed  or  treated  as  a  will, 
except  for  the  cause  suggested.  {^Mastennan  v.  Afaberly,  2  Hagg.  235  ; 
4  E.  Ecc.   R.  103.) 

[Omitting  other  questions.] 

New  trial  not  to  be  orranted.' 


II.  What  constitutes  eonsideration. 

I.    Payment  of  Pre-existing  Debt. 

§  51  IVES  V.   FARMERS'   BANK.  [§  25] 

2  Allen  (Mass.),  236.  —  1861. 
\^Reported  h,.rei>t  at  p.  293.]- 


2.  Collateral  Security  for  Pre-existing  Debt. 
§51         RAILROAD  COMPANY  v.  NATIONAL  BANK.      [§25] 

102  United  States,  14.  —  1S80. 

Action  by  the  bank  against  the  railroad  company  on  a  promissory 
note.     Defence,    that    the    note   was   diverted    by    the    defendant's 

'  The  doctrine  that  a  bill  or  note  requires  rt«y  consideration  is  of  comparatively 
recent  origin.  It  was  unknown  in  the  time  of  Blackstone  (2  Comm.  446),  and 
early  American  cases  are  to  be  found  in  which  it  appears  to  be  denied  or 
doubted.  {Boiuers  w.  I/urd,  10  Mass.  427;  Livingston  w.Hastie,  2  Cai.  (N.  Y.) 
246.)  But  the  modern  cases  now  uniformly  hold  that  a  bill  or  note  executed 
and  delivered  as  a  gift  is  unenforceable  for  want  of  consideration,  /////v.  Buck- 
tninster,  5  Pick.  (Mass.)  391;  Parish  v.  Stone,  14  Pick.  (Mass.)  198;  Schoonmaker 
V.  Roosa,  17  Johns.  (N.  Y.)  301;  Harris  v.  Clark,  3  N.  Y.  93.  Nor  will  a  meri- 
torious consideration  sustain  a  promissory  note  even  in  equity.  IVhitaker  v. 
Whitaker,  52  N.  Y.  368.  See  also  Matter  of  James,  146  N.  Y.  78  (bond  and 
mortgage),  but  see  37  Am.  L.  Reg.  337. 

The  cases  are  uniform  that  a  bill  and  a  negotiable  note  have  presumptive 
consideration,  i  Daniel  on  Neg.  Inst.,  §§  161-163.  Whether  non-negotiable 
notes  import  a  consideration  is  a  matter  of  the  construction  of  the  statute  gov- 
erning promissory  notes.  Ibid,  §  163;  Art.  XVII,  Div.  I.  3, /(?j/.  As  to  burden 
of  proof,  see  Neg.  Inst.  L.,  §  98  [59]. 

The  courts  do  not  inquire  into  the  adequacy  of  the  consideration;  but  inade- 
quacy of  consideration  may  be  evidence  of  bad  faith  or  fraud.  Jones  v.  Gor- 
don, L.  R.  2  App.  Cas.  616;   Huffcut's  Anson  (8th  Eng.  ed.),  pp.  go-92.  —  Ed. 

"  Accord:  Mayer  v.  Heidelbach,  123  N.  Y.  332.  —  Ed. 


328  CONSIDERATION.  [ART.  III. 

agent,  and  that  the  bank  is  not  a  holder  for  value  and  therefore 
subject  to  the  defence. 

The  note  was  made  by  the  company  payable  to  William  V.  Le 
Count,  its  treasurer,  and  indorsed  by  him  in  blank  and  by  Palmer 
&  Co.,  owners  of  the  larger  portion  of  the  stock.  The  note  thus 
indorsed  was  placed  by  the  company  in  the  hands  of  Hutchinson 
&  Ingersoll,  note-brokers,  for  negotiation  and  sale  in  order  to  raise 
money  for  the  company.  Hutchinson  &  Ingersoll  pledged  the  note 
as  collateral  for  a  loan,  and  subsequently  agreed  that  it  should 
stand  as  collateral  for  a  loan  previously  made.  No  agreement  was 
made  to  extend  the  pre-exising  debt,  or  to  refrain  from  calling  it  in. 

Mr.  Justice  Harlan,  after  stating  the  facts,  delivered  the  opinion 
of  the  court. 

The  next  proposition  involves  the  right  of  the  railroad  company 
to  show,  as  against  the  bank,  that  the  note  was  executed  and 
delivered  to  Hutchinson  &  Ingersoll  for  the  purpose  only  of  raising 
money  upon  it  for  the  company,  and  that,  consequently,  they  had 
no  authority  to  pledge  it  as  collateral  security  for  their  own  indebt- 
edness to  the  bank.'  It  will  have  been  observed,  from  the  state- 
ment of  facts,  that  the  note  in  suit  was  among  those  pledged  to  the 
bank  as  security  for  the  call  loan  of  ^36,000,  made  June  19,  1S73; 
that  Howes,  Hyatt  &  Co.,  whose  notes  had  been  pledged  as  security 
for  the  call  loan  of  $10,000  made  June  19,  1873,  having  become  insol- 
vent, Hutchinson  ts:  Ingersoll,  July  22,  1873,  at  the  request  of  the 
bank,  executed  the  writing,  dated  June  19,  1873,  whereby  they 
pledged  all  securities,  bonds,  stocks,  things  in  action,  or  other  prop- 
erty theretofore  deposited  with  the  bank,  whether  specifically  or  not, 
as  security  for  the  payment  of  any  and  every  indebtedness,  liability, 
or  engagement  held  by  the  bank,  for  which  they  were,  or  should 
become,  in  any  way  liable.  Although,  therefore,  the  call  loan  of 
$36,000  was  extinguished,  without  resorting  to  the  note  in  suit,  that 
note,  under  the  agreement  made  July  22,  1873,  stood  pledged  as 
collateral  security,  also,  for  the$io,ooo  call  loan  of  July  11  [June  19  ?], 

1873- 

The  bank,  we  have  seen,  received  the  note,  before  its  maturity, 

indorsed  in  blank,  without  any  express  agreement  to  give  time,  but 
without  notice  that  it  was  other  than  ordinary  business  paper,  or 
that  there  was  any  defence  thereto,  and  in  ignorance  of  the  pur- 
poses for  which  it  had  been  executed  and  delivered  to  Hutchinson 
&  Ingersoll.  Did  the  bank,  under  these  circumstances,  become  a 
holder  for  value,  and  as  such  entitled,  according  to  the  recognized 


'  Only  so  much  of  the  opinion  is  given  as  relates  to  this  question.  —  Ed. 


II.]  PRE-EXISTIXG   DEBT.  329 

principles  of  commercial  law,  to  be  protected  against  the  equities 
or  defences  which  the  railroad  company  may  have  against  the  other 
parties  to  the  note? 

This  question  was  carefully  considered,  though,  perhaps,  it  was 
not  absolutely  necessary  to  be  determined,  in  Swift  v.  Tyson  (16 
Pet.  I.)     .     .     . 

The  opinion  in  that  case  has  been  the  subject  of  criticism  in  some 
courts,  because  it  seemed  to  go  beyond  the  precise  point  necessary 
to  be  decided,  when  declaring  that  the  bona  fide  holder  of  a  negotiable 
note,  taken  as  collateral  security  for  an  antecedent  debt,  was  pro- 
tected against  equities  existing  between  the  original  or  antecedent 
parties.  The  brief  dissent  of  Mr.  Justice  Catron  was  solely  upon 
that  ground,  which  renders  it  quite  certain  that  the  whole  court  was 
aware  of  the  extent  to  which  the  opinion  carried  the  doctrines  of 
the  commercial  law  upon  the  subject  of  negotiable  instruments 
transferred  or  delivered  as  security  for  antecedent  indebtedness. 
In  the  judgment  of  this  court,  as  then  constituted  (Mr.  Justice  Cat- 
ron alone  excepted),  the  holder  of  a  negotiable  instrument,  received 
before  maturity,  and  without  notice  of  any  defence  thereto,  is 
unaffected  by  the  equities  or  defences  of  antecedent  parties,  equally 
whether  the  note  is  taken  as  collateral  security  for  or  in  payment 
of  previous  indebtedness.  And  we  understand  the  case  of  McCarty 
v.  Eoois  (21  How.  432),  to  affirm  S7o(ff  v.  Tyson,  upon  the  point  now 
under  consideration.  It  was  there  said:  "  Nor  does  the  fact  that 
the  bills  were  assigned  to  the  plaintiff  as  collateral  security  for  a 
pre-existing  debt  impair  the  plaintiffs  right  to  recover."  (p.  438.) 
"  The  delivery  of  the  bills  to  the  plaintiff  as  collateral  security  for 
a  pre-existing  debt,  under  the  decision  of  Swift  v.  Tyson,  was  legal." 

(P-  439-) 

It  may  be  remarked  in  this  connection  that  the  courts  holding  a 
different  rule  have  uniformly  referred  to  an  opinion  of  Chancellor 
Kent  in  Bay  v.  Coddington  (5  Johns.  Ch.  [N.  Y.]  54),  reafifirmed  in 
Coddington  v.  Bay  (20  Johns.  [N.  Y.]  637.)  There  is,  however, 
some  reason  to  believe  that  the  views  of  that  eminent  jurist  were 
subsequently  modified.  In  the  later  editions  of  his  Commentaries 
(vol.  Ill,  p.  81,  note  b.),  prepared  by  himself,  reference  is  made  to 
Stalker  v.  McDonald  (6  Hill  [N.  Y.]  93),  in  which  the  principles 
asserted  in  Bay  v.  Coddington  were  re-examined  and  maintained  in 
an  elaborate  opinion  by  Chancellor  Walworth,  who  took  occasion  to 
say  that  the  opinion  in  Swift  v.  Tyso7i  was  not  correct  in  declaring 
that  a  pre-existing  debt  was,  of  itself,  and  without  other  circum- 
stances, a  sufficient  consideration  to  entitle  the  bona  fide  \io\(S.tx,  with- 
out notice,  to  recover  on  the  note,  when  it  might  not,  as  between 


330  CONSIDERATIOX.  [ART.  III. 

the  original  parties,  be  valid.  But  Chancellor  Kent  adds:  "Mr. 
Jastice  Story,  on  Promissory  Notes  (p.  215,  note  i),  repeats  and 
sustains  the  decision  in  Swiff  v.  Tysorty  and  I  am  inclined  to  concur 
in  that  decision  as  the  plainer  and  better  doctrine."  Of  course  it 
did  not  escape  his  attention  that  the  court  in  Swift  v.  Tyson  declared 
the  equities  of  prior  parties  to  be  shut  out  as  well  when  the  note  was 
merely  pledged  as  collateral  security  for  a  pre-existing  debt,  as  when 
transferred  in  payment  or  extinguishment  of  such  debt. 

According  to  the  very  general  concurrence  of  judicial  authority  in 
this  country  as  well  as  elsewhere,  it  may  be  regarded  as  settled  in 
commercial  jurisprudence  —  there  being  no  statutory  regulations 
to  the  contra.y  —  that  where  negotiable  paper  is  received  in  payment 
of  an  antecedent  debt;  '  or  where  it  is  transferred,  by  indorsement, 
as  collateral  security  for  a  debt  created,  or  a  purchase  made,  at  the 
time  of  transfer; '  or  the  transfer  is  to  secure  a  debt,  not  due,  under 
an  agreement,  express  or  to  be  clearly  implied  from  the  circum- 
stances, that  the  collection  of  the  principal  debt  is  to  be  postponed 
or  delayed  until  the  collateral  matured;  or  where  time  is  agreed  to 
be  given  and  is  actually  given  upon  a  debt  overdue,  in  consideration 
of  the  transfer  of  negotiable  paper  as  collateral  security  therefor;' 
or  where  the  transferred  note  takes  the  place  of  other  paper  pre- 
viously pledged  as  collateral  security  for  a  debt,  either  at  the  time 
such  debt  was  contracted  or  before  it  became  due,  —  in  each  of 
these  cases  the  holder  who  takes  the  transferred  paper,  before  its 
maturity',  and  without  notice,  actual  or  otherwise,  of  any  defence 
thereto,  is  held  to  have  received  it  in  due  course  of  business,  and, 
in  the  sense  of  the  commercial  law,  becomes  a  holder  for  value, 
entitled  to  enforce  payment,  without  regard  to  any  equity  or  defence 
wntch  exists  between  prior  parties  to  such  paper. 

Upon  these  propositions  there  seems  at  this  day  to  be  no  sub- 
stantial conflict  of  authority.  But  there  is  such  conflict  where  the 
note  is  transferred  as  collateral  security  merely^  without  other  cir- 
cumstances, for  a  debt  previously  created.  One  of  the  grounds  upon 
which  some  courts  of  high  authority  refuse,  in  such  cases,  to  apply 
the  rule  announced  in  Swift  v.  Tyson,  is,  that  transactions  of  that 
kind  are  not  in  the  usual  and  ordinary  course  of  commercial  deal- 
ings. But  this  objection  is  not  sustained  by  the  recognized  usages 
of  the  commercial  world,  nor,  as  we  think,  by  sound  reason.  The 
transfer  of  negotiable  paper  as  security  for  antecedent  debts  con- 

'  Accord:  Mayer  v.  Hcidelbach,  123  X.  Y.  332.  —  Ed. 

*  Bank  V.  Vanderk&rst,  32  N.  Y.  553.  —  Ed. 

*  The  agreement  for  extension  must  be  definite  and  binding.  Atlantic  X.  B. 
V.  Franklin,  53  N.  Y.  235.  —  Ed. 


II.]  PRE-EXISTING  DEBT.  55 1 

sdtutes  a  material  and  anr    -  z  :    '  r.erce  cf  the 

country.     Sach  transact-  ~ --  -      :.    .-  ■  . : /  ;  -  ^. - :- -  _  :\  :n  nnanciai 

circles.     They  have  ^  :..:.-.  ..-rr.:,.;    ; ;'    ^ -smess,  and, 

in  these  days  of   f     "  activity  ■.-.--"  :  .  r.iriiiiiite  largely 

to  the  benefit  and  :        .-        .  .  :f  ct'r:   :;  -:i_  creditors.     Mr. 

Parsons,  in  his  trea :  r  -  r  -  ^  ; :  j  -  r  -  -  Notes  and  Bills  of 
Exchange,  discuss 7-  :       .^        ~  .  .    t   .  ::.-5ferof  Eegoti- 

able  paper  under  i-:..   .^  —  .  :r  „;  ;^?er  is  received 

as  collateral  seciarity  ::r  ^  -  r.. ::.:  iebts.  We  concur  with  the 
author,  "  that,  wlhr  -  e     - 

lished  more  firmlj  :--.  :  -   :         _    .    7  r  ::  .    :        :   :t;- 

tion  over  the  instruments  of  the  merchan:.  _..  ; :'  :..-:-:  '.nnsfers 
(not  affected  by  peculiar  c"-  -:-.-"  -■'.".  .  '/.-^L  :  re  regular, 
and  to  rest  upon  a  va!:ii  7     -      -    Xotes  and 

Bills,  2d  ed.,  21S.)     A:  -   .  ;  ooxts  have 

declined  to  sanct'.r    :  .---  :s,  that 

upon  the  transfer    :      _  7:         .5  ?ecnrity 

for  an  anteceden:     v    :  ,.     ^  5_::f:   .err^  fee. — 

that  to  permit  :'  ?  7       -     :       -:     f  :  irprves 

him  of  no  ri^    :  _:  :    '  t-insfer. 

imposes  upon   —  -.      -r-ir  .f    1:. _   5        .    . r 

additional  inc:  ^ 

This  may  be  :    .•.   -  .  r     y.e.  but  it  is  ?.::::-  -:   : :.i-r    r  :r 

in  our  opinion,  is    :  r      '.  "^^  ^*3 

the  transferee,  is  11"-  r^:._  .^r-  ".  -  _  .  :_  -_  instru- 

ment, and  impose  upon  him  the  duties  which,  according  to  the  com- 
merciail  law,  must  be  discharged  by  the  holder  : :"  -  _  ■"  '  "r  ;;.-.- rr 
in  order  to  fix  liability  upon  the  indorser. 

The  bank  did  not  take  the  note  in  suit  as  a  mere  agent  to  receive 
the  amount  due  when  it  suited  the  convf~":":.  "'  :"-:  .~:":-:~rto 
make  payment.     It  received  the  note  umc-.     ..  ^..'. ._  .    ///sea 

by  the  commercial  law,  to  present  it  for  payment,  and  give  noooe  of 
non-payment,  in  the  mode  prescribed  by  the  settled  rales  of  that 
law.  We  are  of  opinion  that  the  undertaking  of  the  bank  to  fix  the 
liability  of  prior  parties,  by  due  presentation  for  payment  and  due 
notice  in  case  of  non-payment  —  an  undertaking  necessarily  implied 
bv  becoming  a  party  to  the  instrument,  —  was  a  snfficient  considera- 
tion to  protect  it  against  equities  existing  between  t  -  ■  es, 
of  which  it  had  no  notice.  It  assumed  the  duties  ..  -  -  .  :li- 
ties  of  a  holder  for  value,  and  should  have  the  rights  and  privileges 
pertaining  to  that  position.  The  correctness  of  this  rale  is  apparent 
in  cases  like  the  one  now  before  us.  The  note  in  suit  was  negotiable 
in  form,  and  was  delivered  by  the  maker  for  the  purpose  of  being 


332  CONSIDERATION.  [ART.  III. 

negotiated.  Had  it  been  regurlarly  discounted  by  the  banlc,  at  any 
time  before  maturity,  and  the  proceeds  either  placed  to  the  credit 
of  Hutchinson  &  Ingersoll,  or  applied  directly  to  the  discharge, /r^* 
tanto,  of  any  one  of  the  call  loans  previously  made  to  them,  it  would 
not  be  doubted  that  the  bank  would  be  protected  against  the  equities 
of  prior  parties.  Instead  of  procuring  its  formal  discount,  Hutchin- 
son &  Ingersoll  used  it  to  secure  the  ultimate  payment  of  their  own 
debt  to  the  bank.  At  the  time  the  written  agreement  of  July  22, 
1873,  was  executed,  by  which  this  note,  with  others,  was  pledged  as 
security  for  any  debt  then  or  thereafter  held  against  them,  the  bank 
had  the  right  to  call  in  the  $10,000  loan,  that  is,  to  require  imme- 
diate payment.  The  securities  upon  which  that  loan  rested  had 
become,  in  part,  worthless,  and  it  is  evident  that  but  for  the  deposit 
of  additional  collateral  securities  the  bank  would  have  called  in  the 
loan,  or  resorted  to  its  rightful  legal  remedies  for  the  enforcement 
of  payment.  It  was,  under  the  circumstances,  the  duty  of  the  debt- 
ors to  make  such  payment,  or  to  secure  the  debt.  It  was  important 
to  them,  and  was  in  the  usual  course  of  commercial  transactions,  to 
furnish  such  security.  If  the  bank  was  deceived  as  to  the  real 
ownership  of  the  paper,  or  as  to  the  purposes  of  its  execution  and 
delivery  to  Hutchinson  &  Ingersoll,  it  was  because  the  railroad  com- 
pany intrusted  it  to  those  parties  in  a  form  v/hich  indicated  that  the 
latter  were  its  rightful  holders  and  owners,  with  absolute  power  to 
dispose  of  it  for  any  purpose  they  saw  proper. 

Our  conclusion,  therefore,  is  that  the  transfer,  before  maturity, 
of  negotiable  paper,  as  security  for  an  antecedent  debt  merely,  with- 
out other  circumstances,  if  the  paper  be  so  endorsed  that  the  holder 
becomes  a  party  to  the  instrument,  although  the  transfi^r  is  without 
express  agreement  by  the  creditor  for  indulgence,  is  not  an  improper 
use  of  such  paper,  and  is  as  much  in  the  usual  course  of  commercial 
business  as  its  transfer  in  payment  of  such  debt.  In  eitlicr  case, 
the  bona  fide  holder  is  unaffected  by  equities  or  defences  between 
prior  parties,  of  which  he  had  no  notice.  This  conclusion  is  abund- 
antly sustained  by  authority.  A  different  determination  by  this 
court  would,  we  apprehend,  greatly  surprise  both  the  legal  profes- 
sion and  the  commercial  world.  (See  Bigelow's  Bills  and  Notes, 
502  d  seq.;  i  Daniel,  Neg.  Inst.,  2d  ed.,  c.  25,  §§  820-833;  Story, 
Prom.  Notes,  §§  186,  195,  7th  ed.  by  Thorndyke;  i  Parsons, 
Notes  and  Bills,  2d  ed.,  218,  §  4,  c.  6;  and  Redf^eld  and  Bigelow's 
Leading  Cases  upon  Bills  of  Exchange  and  Promissory  Notes,  where 
the  authorities  are  cited  by  the  authors.) 

[The  Court  then  holds  that  the  Federal  courts  are  not  controlled 
by  the  decisions  of  State  courts  on  questions  of  general  commercial 
law.] 


II.]  rUE-liXISTING   DEBT.  333 

[Mr.  Justice  Clifford  concurred  in  an  opinion  of  great  learning, 
but  of  too  great  length  to  be  reprinted  here.] 

Mr.  Justice  Bradley.  — I  concur  in  the  judgment  rendered  in 
this  case,  and  in  most  of  the  reasons  given  in  the  opinion.  But,  in 
reference  to  the  consideration  of  the  transfer  of  the  note  as  collateral 
security,  I  do  not  regard  the  obligation  assumed  by  the  indorsee 
(the  bank),  to  present  the  note  for  payment  and  give  notice  of  non- 
payment, as  the  only,  or  the  principal,  consideration  of  such  transfer. 
The  true  consideration  was  the  debt  due  from  the  indorsers  to  the 
indorsee,  and  the  obligation  to  pay  or  secure  said  debt.  Had  any 
other  collateral  security  been  given,  as  a  mortgage,  or  a  pledge  of 
property,  it  would  have  been  equally  sustained  by  the  consideration 
referred  to;  namely,  the  debt  and  the  obligation  to  pay  it  or  to 
secure  its  payment.  If  the  indorsers  had  assigned  a  mortgage  for 
that  purpose,  the  title  of  the  bank  to  hold  the  mortgage  would  have 
been  indubitable.  In  that  case  prior  equities  of  the  mortgagor 
might  have  prevailed  against  the  title  of  the  bank;  because  a  mort- 
gage in  not  a  commercial  security,  and  its  transfer  for  any  considera- 
tion whatever  does  not  cut  off  prior  equities.  But  the  bona  fide 
transfer  of  commercial  paper  before  maturity  does  cut  off  such 
equities;  and  every  collateral  is  held  by  the  creditor  by  such  title 
and  in  such  manner  as  appertain  to  its  nature  and  qualities.  Security 
for  the  payment  of  a  debt  actually  owing  is  a  good  consideration, 
and  sufficient  to  support  a  transfer  of  property.  When  such  trans- 
fer is  made  for  such  purpose,  it  has  due  effect  as  a  complete  transfer, 
according  to  the  nature  and  incidents  of  the  property  transferred. 
When  it  is  a  promissory  note  or  bill  of  exchange,  it  has  the  effect  of 
giving  absolute  title  and  of  cutting  off  prior  equities,  provided  the 
ordinary  conditions  exist  to  give  it  that  effect.  If  not  transferred 
before  maturity  or  in  due  course  of  business,  then,  of  course,  it  can- 
not have  such  effect.  But  I  think  it  is  well  shown  in  the  principal 
opinion  that  a  transfer  for  the  purpose  of  securing  a  debt  is  a  trans- 
fer in  due  course.     And  that  really  ends  the  argument  on  the  subject. 

Mr.  Justice  Miller  and  Mr.  Justice  Field  dissented. 

Judgment  affirmed." 

'  See  also  Brook,  O.  &  Co.  v.  Vaunest,  58  N.  J.  L.  162,  post,  p.  359.  "  We  are 
of  the  opinion  that  a  crediior  to  whom  a  negotiable  security  is  given  on  account 
of  a  pre-existing  debt  holds  it  by  an  indefeasible  title,  whether  it  be  one  pay- 
able at  a  future  time  or  on  demand."  Currie  v.  Afisa,  L.  R.  10  Ex.  153,  Lord 
Coleridge,  C.  J.,  dissenting. 

For  full  collection  of  authorities  on  this  vexed  question,  see  4  Eng.  «&  Am. 
Encyc.  of  Law,  2d  cd.,  pp.  290-295. 

It  was  probably  the  intent  of  the  framers  of  §  51  [25]  of  the  Neg.  Inst.  L.  to 
abolish  the  rule  established  in  Coddington  v.  Bay,  20  Johns.  637,  and  ever  sin  e 


334  CONSIDERATION.  [ART.  III. 

III.  Holder  for  value. 

§  52  HUNTER  V.  WILSON.  [§  26] 

4  Exchequer  Reports,  4S9.  —  1849. 

This  was  an  action  by  the  plaintiff,  as  endorsee  of  a  bill  of 
exchange,  against  the  defendant,  as  acceptor.  The  defendant 
pleaded  (in  substance),  that  the  bill  of  exchange  was  drawn  by  one 
McLean,  at. the  request  and  for  the  accomriodation  of  the  defend- 
ant, and  without  any  consideration  or  value  whatever,  and  that  the 
till  was  endorsed  by  the  said  McLean  without  any  consideration  or 
value  given  by  the  plaintiff  for  such  endorsement,  to  the  defendant, 
or  to  the  said  McLean,  or  to  any  other  person  whomsoever.  The 
plaintiff  had  signed  interlocutory  judgment  upon  this  plea,  the 
defendant  being  under  terms  of  pleading  issuably.  A  rule  }iisi  was 
subsequently  obtained,  on  the  part  of  the  defendant,  to  set  this 
judgment  aside,  but  without  any  affidavit  of  merits. 

Wi/Ies  now  showed  cause.  —  The  plaintiff  was  clearly  entitled  to 
sign  judgment,  for  the  plea  is  not  issuable.  It  is  quite  consistent 
with  the  plea  that  there  was  a  good  consideration  given  for  the  bill. 
It  may  have  passed  through  many  hands,  each  party  having  given 
consideration.  [Rolfe,  B.  —  It  may  have  been  endorsed  to  A.  B., 
who  made  a  present  of  it  to  the  plaintiff.]  Or  the  defendant  may 
have  owed  a  debt  to  some  third  party.  The  allegation  that  the  bill 
was  drawn  for  the  accommodation  of  the  defendant  is  absurd. 
[Rolfe,  B. — The  plaintiff  may  be  the  executor  of  a  person  who 
gave  full  value  for  it.]  He  was  then  stopped  by  the  Court,  who 
called  upon 

Barnard,  in  support  of  the  rule,  who  contended  that  the  plea  was 
good  upon  general  demurrer. 

Parke,  B.  —  The  plea  is  clearly  not  issuable,  and  the  plaintiff  was 
entitled  to  sign  judgment.  There  is  not  even  an  allegation  in  the 
plea,  that  none  of  the  previous  parties  to  the  bill  had  given  value 
for  the  endorsement.  The  rule,  therefore,  ought  to  be  discharged, 
and  with  costs,  as  the  defendant  is  not  prepared  with  an  affidavit  of 
merits. 

Pollock,  C.  B.,  Alderson,  B.,  and  Rolfe,  B.,  concurred. 

Rule  discharged,  with  costs. 

in  force  in   New  York;  whether  the  language  used   is  apt  for  that  purpose  will 
be  a  question  for  judicial  determination. 

For  the  New  York  and  general  rule  as  to  transfer  of  accommodation  paper 
as  security  for  a  pre-existing  debt,  see  Grocers'  Bank  v.  Pctijicld,  69  N.  Y.  502, 
post,  p.  339  —  En. 


III.]  HOLDER   FOR   VALUE.  335 

§  52  [26]  Hoffman  v.  Bank,  12  Wallace  (U.  S.),  iSi,  190.  (1S70.) 
Mr.  Justice  Clifford.  .  .  .  Different  rules  apply  between 
the  immediate  parties  to  a  bill  of  exchinge  —  as  between  the  drawer 
and  the  acceptor,  or  between  the  payee  and  the  drawer/  —  as  the 
only  consideration  as  between  those  parties  is  that  which  moves 
from  the  plaintiff  to  the  defendant;  and  the  rule  is,  if  that  con- 
sideration fails,  proof  of  that  fact  is  a  good  defence  to  the  action. 
But  the  rule  is  otherwise  between  the  remote  parties  to  the  bill,  — 
as,  for  example,  between  the  payee  and  the  acceptor,  or  between 
the  indorsee  and  the  acceptor,-'  —  as  two  distinct  considerations 
come  in  question  in  every  such  case  where  the  payee  or  indorsee 
became  the  holder  of  the  bill  before  it  was  overdue  and  without  any 
knowledge  of  the  facts  and  circumstances  which  impeach  the  title 
as  between  the  immediate  parties  to  the  instrument.  Those  two 
considerations  are  as  follows:  First,  that  which  the  defendant 
received  for  his  liability,  and,  secondly,  that  which  the  plaintiff  gave 
for  his  title,  and  the  rule  is  well  settled  that  the  action  between  the 
remote  parties  to  the  bill  will  not  be  defeated  unless  there  be  an 
absence  or  failure  of  both  these  consideration.  {^Robmsoji  v.  Rev- 
7ioIds,  2  Q.  B.  202;  Same  v.  Sajiic,  in  error,  lb.  210;  Byles  on  Bills 
(5th  Am.  ed.),  124;  TIiicdcmann\.  Goldsc/uiiidf,  i  De  Gex,  Fisher  and 
Jones,  Ch.  App.  10.) 

Unless  both  considerations  fail  in  a  suit  by  the  payee  against  the 
acceptor,  it  is  clear  that  the  action  may  be  maintained,  and  many 
decided  cases  affirm  the  rule,  where  the  suit  is  in  the  name  of  a 
remote  indorsee  against  the  acceptor,  that  if  any  intermediate  holder 
between  the  defendant  and  the  plaintiff  gave  value  for  the  bill,  such 
an  intervening  consideration  will  sustain  the  title  of  the  plaintiff. 
(^Hunter  \.  Wilson^  4  Exchequer,  489;  Boyd  v.  AfcCann,  10  Maryland, 
118;  Howell  \.  Crane,  12  La.  Annual,  126;  Watson  v.  Flanagan,  14 
Texas,  354.) 


§  52  SIMON  V.  MERRITT.  [§  26] 

33  Iowa,  537.  — 1871. 
\_Reported  herein  at  p.     417.] 

'  Or  between  maker  and  payee,  or  between  indorser  and  immediate 
indorsee.  —  Ed. 

'Or  between  indorsee  and  maker,  or  between  indorsee  and  remote  (not  imme- 
diate) prior  indorser.  —  Ed. 


336  CONSIDERATION.  [ART.  III. 

§  52  HEUERTEMATTE  v.  MORRIS.  [§  26] 

loi  New  York,  63.  —  1SS5. 

Action  against  acceptor.  Judgment  for  plaintiffs;  reversed  at 
General  Term.     Plaintiffs  appeal. 

The  bill  was  drawn  upon  defendant  and  transferred  to  plaintiffs 
for  value.     Defendant  afterward  accepted  it. 

RuGER,  Ch.  J.,  [after  disposing  of  another  matter].  — The  General 
Term  conceded  that  the  plaintiffs  were  bona  fide  holders  for  value  of 
the  bill  before  acceptance,  but  deny  them  that  character  after 
acceptance  as  against  the  acceptor.  We  think  the  concession  is 
fatal  to  the  conclusion  reached  by  that  court. 

It  is  said  that  the  F.  <s^  M.  Bank  v.  Empire  Stone  Dressing  Co. 
(5  Bosw.  290),  is  authority  for  the  position.  It  is  true  that  some 
expressions  of  the  learned  judge  writing  in  that  case  may  justify  the 
citation,  yet  it  should  be  considered  that  those  remarks  were 
unnecessary  to  the  decision  of  the  case,  and  the  same  court  has 
twice  since  then  refused  to  follow  it. 

We  conceive  the  rule  there  laid  down  finds  no  support  in  the  doc- 
trines of  the  text-writers  or  the  reported  cases.  {Philbrick  v.  Dallett., 
2  J.  &  S.  370;  First  Nat.  Bank  of  Portland  \.  Schuyler.,  7  Id.  440; 
Parsons  on  Bills  and  Notes,  323;  Daniel  on  Neg.  Inst.,  §  534; 
Edwards  on  Bills  [2d  ed.],  410.) 

If  a  party  becomes  a  bona  fide  holder  for  value  of  a  bill  before  its 
acceptance,  it  is  not  essential  to  his  right  to  enforce  it  against  a 
subsequent  acceptor,  that  an  additional  consideration  should  proceed 
from  him  to  the  drawee.  The  bill  itself  implies  a  representation  by 
the  drawer  that  the  drawee  is  already  in  receipt  of  funds  to  pay,  and 
his  contract  is  that  the  drawee  shall  accept  and  pay  according  to  the 
terms  of  the  draft.  (Parsons  on  Bills,  323,  544;  Arpin  v.  C/iapin, 
Mass.  Sup.  Ct.,  Oct.,  18S5.)  The  drawee  can,  of  course,  upon  pre- 
sentment refuse  to  accept  a  bill,  and  in  that  event  the  only  recourse 
of  the  holder  is  against  the  prior  parties  thereto;  but  in  case  the 
drawee  does  accept  a  bill,  he  becomes  primarily  liable  for  its  pay- 
ment, not  only  to  its  indorsees  but  also  to  the  drawer  himself. 

The  delivery  of  a  bill  or  check  by  one  person  to  another  for  value 
implies  a  representation  on  the  part  of  the  drawer  that  the  drawee 
is  in  funds  for  its  payment,  and  the  subsequent  acceptance  of  such 
check  or  bill  constitutes  an  admission  of  the  truth  of  the  representa- 
tion, which  the  drawee  is  not  allowed  to  retract.  (Daniel  on  Neg. 
Inst.  534;  Parsons  on  Bills,  323,  544,  545-)  By  such  acceptance  the 
drawee  admits  the  truth  of  the  representation,  and  having  obtained 
a  suspension  of  the  holder's  remedies  against  the  drawer,  and  an 


III.]  HOLDER   FOR  VALUE.  337 

extension  of  credit  by  his  admission,  is  not  afterwards  at  liberty  to 
controvert  the  fact  as  against  a  bona  fide  holder  for  value  of  the  bill. 

The  payment  to  the  drawer  of  the  purchase  price  furnishes  a  good 
consideration  for  the  acceptance  which  he  then  undertakes  shall  be 
made,  and  its  subsequent  performance  by  the  drawee  is  only  the 
fulfillment  of  the  contract  which  the  drawer  represents  he  is  author- 
ized by  the  drawee  to  make. 

The  rule  that  it  is  not  competent  for  an  acceptor  to  allege  as  a 
defence  to  an  action  on  a  bill  that  it  was  done  without  consideration, 
or  for  accommodation,  as  against  a  bona  fide  holder  for  value  of  such 
paper,  flows  logically  from  the  conclusive  force  given  to  his  admis- 
sion of  funds,  and  is  elementary.  (Daniel  on  Neg.  Inst.,  §§  532- 
534;  Edwards  on  Bills,  410;  Harger  v.  Worrall,  69  N.  Y.  371;  Cotn. 
Bk.  of  Lake  Erie  v.  Norton,  i  Hill,  501;  Robinson  v.  Reynolds,  2  Q.  B. 
196,  211;  Hoffman  v.  Bk.  of  Mihuaukee,  12  Wall.  181.) 

Of  course  the  cases  determined  upon  the  ground  that  the  payee  of 
such  paper  received  it  to  apply  upon  an  antecedent  debt,  or  that  it 
had  been  unlawfully  diverted  from  the  purpose  for  which  it  was 
designed,  have  no  application  to  the  circumstances  of  this  case. 

The  judgments  of  the  courts  below  should,  therefore,  be  reversed 
and  a  new  trial  ordered,  with  costs  to  abide  the  result. 

All  concur.     Judgment  reversed. 


§  53  STODDARD  v.  KIMBALL.  [§  27] 

6  Gushing  (Mass.),  469.  —  1850. 

Shaw,  C.  J.  .  .  .  In  the  present  case,  it  appearing  that  the 
note  was  negotiated  to  the  plaintiffs  before  it  was  due,  for  a  valua- 
ble consideration,  and  the  jury  having  found  that  they  took  it  with- 
out notice  of  the  misapplication  by  the  maker,  it  is  clear  that  they 
have  a  right  to  recover;  and  the  only  remaining  question  is,  for  what 
amount  they  may  recover.  In  general,  the  holder  of  an  indorsed 
note  will  be  entitled  to  recover  the  whole  amount  of  the  face  of  the 
note,  because  the  presumption  of  fact,  in  the  absence  of  counter 
proof,  is,  that  he  gave  the  full  value  for  it,  or  that  he  took  it  from 
some  other  holder  for  value,  to  collect  the  amount,  receive  a  certain 
part  to  his  own  use,  and  account  to  the  party  from  whom  he  took  it 
for  the  surplus.  Having  taken  it  to  secure  a  pre-existing  debt,  of 
a  less  amount,  he  is  a  holder  for  value  in  his  own  right,  only  to  the 
amount  of  the  debt  due  him.  If  therefore  it  appears  in  proof,  that 
the  plaintiff  is  not  accountable  to  any  third  person  for  any  surplus 

NEGOT.   INSTRUMENTS — 22 


338  CONSIDERATION.  [ART.  III. 

then  there  is  no  reason  why  he  should  recover  any  more  than  the 
balance  of  the  debt,  for  which  he  is  a  bona  fide  holder  for  value. 
Here,  it  appears  that  the  plaintiff  received  this  note  of  the  maker, 
for  whose  accommodation  the  defendant  indorsed  it.  It  being 
obvious  that  the  plaintiff  can  recover  nothing  as  trustee  for  the 
party  from  whom  he  received  it,  he  is  liable  over  to  nobody  for  the 
surplus,  and  therefore  can  have  judgment  only  for  the  amount  due 
to  himself,  for  his  own  use  and  in  his  own  right,  which  is  so  much 
of  the  note  as  may  be  necessary  to  satisfy  the  balance  of  the  debt, 
for  the  security  of  which  he  received  it. 

Judgment  on  the  verdict  for  the  plaintiff  for  the  smaller  sum. 


IV.  Effect  of  want  of  consideration. 

§  54  OSGOOD  V.  ARTT.  [§  28] 

17  Federal  Reporter,  575.  —  1883. 
[Reported  herein  at  p.  375.] 


§  54  STACY  V.   KEMP.  [§  28] 

97  Massachusetts,  166.  —  1867. 

Contract  upon  a  promissory  note.  Defence,  partial  failure  of 
consideration  in  that  plaintiff,  having  agreed  not  to  peddle  milk  in 
H.,  had  continued  to  do  so,  etc.  The  trial  court  held  evidence  of 
this  inadmissible.     Plaintiff  alleges  exceptions. 

Chapman,  J.,  [after  disposing  of  another  question].  —  It  was  com- 
petent to  the  defendant  to  prove  that  the  note  was  given  as  well  in 
consideration  of  a  sale  of  the  good  will  of  the  milk  route,  and  an 
agreement  not  to  go  into  business  which  should  interfere  with  it,  as 
of  a  sale  of  the  articles  enumerated  in  the  bill  of  parcels.  Agree- 
ments of  this  character  are  valid,  and  are  often  specifically  enforced 
in  equity  by  injunction,  and  at  law  by  actions  for  damages.  Evi- 
dence that  the  plaintiff  has  interfered  with  the  route  in  the  manner 
stated,  would  tend  to  show  that  he  has  deprived  the  defendant  of  a 
part  of  the  consideration  for  which  the  note  is  given.  It  was 
formerly  held  that  such  damages  must  be  recovered  by  a  cross- 
action,  and  could  not  be  proved  and  allowed  in  defence  of  an  action 
on  the  note,  by  way  of  recoupment.  But  the  doctrine  of  recoupment  of 
damages  was  fully  established  in  this  court,  in  Harrington  v.  Stratton, 


v.]  ACCOMMODATION   PARTY.  339 

(22  Pick.  510.)  (See  Burnett  \.  Smith,  4  Gray,  50.)  It  has  since 
been  applied  in  numerous  cases,  and  was  already  well  established  in 
New  York.  It  is  an  equitable  set-off  of  damages  which  ought  to  be 
deducted  from  the  plaintiff's  demand,  and  for  the  recovery  of  which 
the  defendant  ought  not  to  be  turned  round  to  a  cross-action.  The 
court  are  of  opinion  that  it  should  be  applied  to  a  case  like  the  pre- 
sent, where  the  plaintiff  has  deprived  the  defendant  of  a  valuable 
part  of  the  consideration  of  the  note  in  suit,  if  the  facts  which  were 
alleged  shall  be  proved. 

The  first  exception  must  be  overruled;  and  the  second  sustained.' 


V.  Liability  of  aeeommodation  party. 

§  55  GROCERS'  BANK  v.  PENFIELD.  [§  29] 

69  New  York,  502.  —  1S77. 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  first  judicial  department  reversing  a  judgment  in  favor  of 
defendants,  entered  upon  the  report  of  a  referee.  (Reported  below, 
7   Hun,  279.) 

This  action  was  upon  two  promissory  notes,  on  which  defendants 
Penfield  and  Stone  were  makers,  which  were  made  payable  to  defend- 
ant Truax,  and  by  him  indorsed  and  transferred  to  plaintiff. 

The  referee  found,  in  substance,  that  the  notes  were  executed  by 
the  makers  without  any  consideration;  were  accommodation  notes, 
and  were  received  by  plaintiff  solely  as  collateral  security  for  a  pre- 
cedent debt,  without  any  agreement  to  extend  the  time  of  payment 
of  the  debt,  and  thereupon  held  that  plaintiff  was  not  di  bona  fide 
holder  for  value,  and  directed  judgment  dismissing  the  complaint 
as  to  said  makers. 

Rapallo,  J. — We  think  that  the  order  in  this  case  must  be 
affirmed  on  the  ground  stated  by  Brady,  J.,  in  his  opinion  delivered 
at  General  Term.  Whatever  confusion  may  have  existed  upon  the 
point,  we  think  that  we  may  now  safely  say,  in  the  language  of  Pro- 
fessor Parsons  (i  Parsons  on  Notes  and  Bills,  296),  that  it  is  uni- 
versally conceded  that  the  holder  of  an  accommodation  note,  without 

'  Accord:  Torinus  v.  Buckham,  29  Minn.  128;  i  Daniel  on.  Neg.  Inst. 
^§  201-204.  One  who  is  "  not  a  holder  in  due  course  "  stands  in  the  same 
relation  as  an  immediate  party.  Thus  a  transferee  of  over-due  paper  is  subject 
to  the  defence  of  failure  of  consideration.  Bryan  v.  Primm,  i  111.  33;  Diamond 
V.  Harris,  33  Tex.  634;  Sawyer  v.  Iloovey,  5  La.  Ann.  153.  — Ed. 


340  CONSIDERATION.  [ART.   III. 

restriction  as  to  the  mode  of  using  it,  may  transfer  it  either  in  pay- 
ment or  as  collateral  security  for  an  antecedent  debt,  and  the  maker 
will  have  no  defence.  (See,  also,  Story  on  Bills,  §  192,  note  tn,  and 
Story  on  Notes,  §  195,  and  authorities  cited.)  The  existing  debt  is 
a  sufficient  consideration  for  the  transfer,  and  no  new  consideration 
need  be  shown.  It  is  only  where  the  note  has  been  diverted  from 
the  purpose  for  which  it  was  entrusted  to  the  payee,  or  some  other 
equity  exists  in  favor  of  the  maker,  that  it  is  necessary  that  the 
holder  should  have  parted  with  value  on  the  faith  of  the  note,  in 
order  to  cut  off  such  equity  of  the  maker.  {Cole  v.  Saulpaugh,  48 
Barb.  104;  Bank  of  Rutland  \ .  Buck,  5  Wend.  66;  Lathrop  v.  Morris^ 
3  Sandf.  7.)  It  has  been  held  by  high  authority  that  an  antecedent 
debt  is  sufficient  even  in  the  case  of  a  note  fraudulently  diverted  to 
constitute  the  holder  a  bona  fide  holder  for  value  without  any  exten- 
sion of  time  or  surrender  of  securities  or  other  new  considerations. 
(^Swift  v.  Tyson,  16  Peters,  i.)  But  in  this  State  that  doctrine  does 
not  prevail.  {Stalker  v.  McDonald,  6  Hill,  93.)  The  leading 
authorities  upon  the  subject  are  reviewed  in  the  case  of  Maitlandw. 
Citizens''  Bank  (40  Maryland,  540.)  Whatever  difference  of  opinion 
may  have  existed,  as  to  the  case  of  a  note  diverted  or  fraudulently 
put  in  circulation,  it  must  be  regarded  as  settled  that  an  indorsee 
of  a  negotiable  note  made  for  the  accommodation  of  the  indorser, 
but  without  restriction  as  to  its  use,  taking  the  note  in  good  faith  as 
collateral  security  for  an  antecedent  debt,  and  without  other  con- 
sideration, is  entitled  to  the  position  of  a  holder  for  value,  and  not 
affected  b)'  the  defence  of  want  of  consideration  to  the  maker. 
We  should  not  have  deemed  it  necessary  to  discuss  the  point  so 
much  at  length,  but  for  the  reason  that  it  does  not  appear  ever  to 
have  been  previously  expressly  adjudicated  in  this  court. 

The  order  should  be  affirmed  and  judgment  absolute,  etc. 

All  concur.  Order  affirmed  and  judgment  accordingly. 

'  See  also  Continental  N.  B.  v.  Townsend,  87  N.  Y.  8,  post.  —  Ed. 


ARTICLE  IV. 

Negotiation. 

I.  What  constitutes  negotiation  op  transfer. 

§  60  [30J   Crouch  v.  Credit  Foncier,  L.  R.  8  Q.  B.  374.   (1873.) 

Blackburn,  J.  —  In  the  present  case  the  plaintiff  has  taken  upon 
himself  the  burden  of  establishing  both  that  the  property  in  the 
debenture  passed  to  him  by  delivery,  and  that  the  right  to  sue  in  his 
own  name  was  transferred  to  him. 

The  two  propositions  are  very  much  connected,  but  not  identical. 
The  holder  of  an  overdue  bill  or  note  may  confer  the  right  on  the 
transferee  to  sue  in  his  own  name,  but  he  conveys  no  better  title 
than  he  had  himself. 

But  the  two  questions  go  very  much  together;  and,  indeed,  in  the 
notes  to  Miller  v.  Race  (i  Smith,  L.  C.  9th  ed.,  p.  491),  where  all  the 
authorities  are  collected,  the  very  learned  author  says:  "  It  may 
therefore  be  laid  down  as  a  safe  rule  that  where  an  instrument  is  by 
the  custom  of  trade  transferable,  like  cash,  by  delivery,  and  is  also 
capable  of  being  sued  upon  by  the  person  holding  \\.  pro  tempore,  then 
it  is  entitled  to  the  name  of  a  negotiable  instrument,  and  the  property 
in  it  passes  to  a  bona  Jide  transferee  for  value,  though  the  transfer 
may  not  have  taken  place  in  market  overt.  But  that  if  either  of  the 
above  requisites  be  wanting,  /.  <?.,  if  it  be  either  not  accustomably 
transferable,  or,  though  it  be  accustomably  transferable,  yet,  if  its 
nature  be  such  as  to  render  it  incapable  of  being  put  in  suit  by 
the  party  holding  it  pro  tempore,  it  is  not  a  negotiable  instrument, 
nor  will  delivery  of  it  pass  the  property  of  it  to  a  vendee,  however 
bona  fide,  if  the  transferor  himself  have  not  a  good  title  to  it,  and 
the  transfer  be  made  out  of  market  overt." 

Bills  of  exchange  and  promissory  notes,  whether  payable  to  order 
or  to  bearer,  are  by  the  law  merchant  negotiable  in  both  senses  of 
the  word.  The  person  who,  by  a  genuine  indorsement,  or,  where 
it  is  payable  to  bearer,  by  a  delivery,  becomes  holder,  may  sue  in  his 
own  name  on  the  contract,  and  if  he  is  a  bona  fide  holder  for  value, 
he  has  a  good  title  notwithstanding  any  defect  of  title  in  the  party 
(whether  indorser  or  deliverer)  from  whom  he  took  it." 

'  For  a  luminous  discussion  of  '  negotiability.'  see  Willis  on  Negotiable  Secu- 
rities (1896),  Lectures  I  and  II.  —  Ed. 

[341] 


Z4^ 


NEGOTIATION.  [ART.  IV. 


I.   Transfer  by  Delivery. 
§  60  BITZER  V.  WAGAR.  [§  30] 

83  Michigan,  223.  —  1890. 
Action  on  the  follo\ving  promissory  note: 
$100.00.  Hart,  Mich.,  March  20,  1889. 

Eight  months  after  date  I  promise  to  pay  to  the  order  of  Marget  A.  Bitzer 
(or  bearer),  one  hundred  dollars,  at  the  Oceana  County  Savings  Bank,  value 
received,  with  interest  at  the  rate  of  6  per  cent. 

Bert  Spellman.  G.  L.  Wagar. 

Judgment  for  plaintiff.  Defendant  brings  error  on  the  ground 
that  the  court  erred  in  admitting  in  evidence  the  note  in  question 
for  the  reason  (a)  that  the  note  is  payable  to  Margaret  A.  Bitzer, 
and  has  never  been  indorsed  or  transferred  by  her  to  plaintiff; 
{b)  that  said  note  is  not  competent  evidence,  for  the  reason  that 
plaintiff  has  not  shown  that  he  owns  or  has  property  in  said  note. 

Long,  J.,  [after  disposing  of  another  matter]. — The  note  is 
plainly  payable  to  bearer,  and  suit  could  be  maintained  thereon  in 

the  name  of  any  holder. 

Judgment  affirmed.* 

§  60  COCK  V.  FELLOWS.  [§  30] 

I  Johnson  (N.  Y.),  143.  —  1806. 

From  the  return  to  the  certiorari  in  this  cause,  it  appeared  that  an 
action  had  been  brought  by  the  defendant  in  error  against  the  pres- 
ent plaintiff,  before  a  justice  of  the  peace,  in  which  he  declared  on 
a  writing  or  note,  in  the  following  words: 

Due  the  bearer  hereof,  3I,  i8s,  lod.,  which  I  promise  to  pay  to  Abraham 
Thompson,  or  order,  on  demand,  as  witness  my   hand,  this  22d,   nth   month, 

•^"  ^Signed}  Jordan  Cock. 

The  note  was  not  endorsed  by  Thompson,  and  the  declaration 
stated  the  note  as  made  payable  to  the  bearer.  The  justice  gave  judg- 
ment for  the  plaintiff  below,  for  the  amount  of  the  note. 

1  Accord:  Grant  v.  Vaughan,  3  Burr.  1516;  Fierce  v.  Crafts,  12  Johns.  (N.  Y.)  90; 
Ellis  V.  Wheeler,  3  Pick.  (Mass.)  iS;  Matthews  v.  Hall,  i  Vt.  316.  In  Illinois 
promissory  notes  payable  "  to  A.  or  bearer  "  require  indorsement,  though  not  if 
payable  "to  bearer."  Roosa  v.  Crist,  17  111.  45°;  Garfield  v.  Berry,  5  111.  App. 
355;  cf.  Avery  v.  Latimer,  14  Oh.  542. 

For  meaning  of  "  instruments  payable  to  bearer,"  see  §  28  [9],  ante. 

As  to  effect  of  special  indorsement  see  Johnson  v.  Mitchell,  50  Tex.  212,  post.  — 
Ed. 


I.  2.]  TRANSFER   BV    INDORSEMENT.  343 

Per  Curiam.  The  word  bearer  has  reference  to  Thompson  as  the 
payee,  and  as  the  promise  is  expressly  to  pay  to  him  or  order,  another 
person  could  not  maintain  an  action  on  the  note  without  his  endorse* 
ment.     The  judgment  below  must  be  reversed. 

Judgment  reversed. 


60  CURTIS  V.  SPRAGUE.  [§  30] 

51  California,  239.  —  1876. 
\Reported  herein  at  p.   268.] 


2,  Transfer  by  Indorsement  and  Delivery. 

(a)    Transfer  by  indorsing  assignment. 

§  60  MARKEY  V.  COREY.  [§  30] 

Michigan,        .  — 1895. 
\66  Northzvestern  Reporter,  4gj.^ 

Action  against  Corey  as  indorser.  The  indorsement  read:  "  I 
hereby  assign  the  within  note  to  Matthew  M.  Markey  and  Catherine 
Sundars."  The  note  also  referred  to  a  certain  contract  which  pro- 
vided that  in  case  of  default  in  any  one  of  five  notes  (of  which  the 
note  in  suit  was  one),  all  of  the  notes,  at  the  option  of  the  payee, 
might  be  declared  due  and  payable.'     Judgment  for  plaintiff. 

Long,  J.,  [after  stating  the  facts].  — The  usual  mode  of  transfer 
of  a  promissory  note  is  by  simply  writing  the  indorser's  name  upon 
the  back,  or  by  writing  also  over  it  the  direction  to  pay  the  indorsee 
named,  or  order,  or  to  him  or  bearer.  An  indorsement,  however, 
may  be  made  in  more  enlarged  terms,  and  the  indorser  be  held  liable 
as  such.  In  Sands  v.  IVood  (i  Iowa,  263),  the  indorsement  was, 
"  I  assign  the  within  note  to  Mrs.  Sarah  Coffin."  In  Sears  v.  Zantz 
(47  Iowa,  658),  the  indorsement  on  the  note  was,  "  I  hereby  assign 
all  my  right  and  title  to  Louis  Meckley."  And  in  each  case  the 
party  so  assigning  was  held  as  indorser,  the  court  in  the  latter  case 
saying  of  Sands  v.  Wood:  "He  used  no  words  that,  in  and  of 
themselves,  indicated  that  he  had  bound  or  made  himself  liable  in 
case  the  maker,  after  demand,  failed  to  pay  the  note.  But  it  was 
held  the  law,  as  a  legal  conclusion,  attached  to  the  words  used  the 

'  Neg.  Inst,  L.,  §  21  [2],  subsec.  3-  —  Ed. 


344  NEGOTIATION.  [ART.  IV, 

liability  that  follows  the  indorsement  of  a  promissory  note."  (See, 
also,  Duffy's  Adm'r  v.  O' Conner,  7  Baxt.  498;  Shelby  v.  Judd,  24 
Kan  166;  Brotherton  v.  Street  [Ind.  Sup.],  24  N.  E.  1068.)  The 
rule  of  the  American  cases  is  well  stated  in  Daniel  on  Neg.  Inst., 
(§  688c),  as  follows:  "  The  question  arising  in  such  cases,  is  a 
nice  one,  and  depends  upon  rules  of  legal  interpretation.  The  mere 
signature  of  the  payee,  indorsed  on  the  paper,  imports  an  executed 
contract  of  assignment,  with  its  implications,  and  also  an  executory 
contract  of  conditional  liability,  with  its  implications.'  The  assign- 
ment would  be  as  complete  by  the  mere  signature  as  with  the  words 
of  assignment  written  over  it.  The  conditional  liability  which  is 
executory  is  implied  by  the  executed  contract  of  assignment,  and 
the  signature  under  it,  which  carried  the  legal  title;  and  the  question 
is,  does  the  writing  over  a  signature  an  express  assignment,  which 
the  law  imports  from  the  signature /t'/-  sc,  exclude  and  negative  the 
idea  of  conditional  liability,  which  the  law  also  imports  if  such 
assignment  were  not  expressed  in  full?  We  think  not.  When  the 
thing  done  creates  an  implication  of  another  to  be  done,  we  cannot 
think  that  the  mere  expression  of  the  former  in  full  can  be  regarded 
as  excluding  its  consequence,  when  that  consequence  would  follow  if 
the  expression  were  omitted." 

The  language  used  in  the  assignment  to  the  note  in  suit  does  not 
negative  the  implication  of  the  legal  liability  of  the  assignor  as 
indorser,  and  as  the  words  are  to  be  construed,  as  strongly 
as  their  sense  will  allow,  against  the  assignor,  he  must  be  held  as 
indorser.  This  rule  is  fully  supported  in  Hatch  v.  Barrett  (34  Kan, 
230;  8  Pac.  129.)  (See,  also,  Adams  y.  Blethen,  66  Me.  19.)  In  the 
case  of  Aniba  v.  Yeomans  {t>9  Mich.  171),  the  assignment  read  as 
follows:  "  I  hereby  transfer  my  right,  title,  and  interest  of  the 
within  note  to  S.  A.  Ycomans."  Mr.  Justice  Marston  said  in  that 
case:  "  The  right  or  interest  passing,  therefore,  under  the  usual 
and  customary  indorsement,  is  much  greater  than  the  mere  right, 
title,  and  interest  of  the  payee;  and  when  the  transfer,  as  made, 
only  attempts  to  pass  the  title  and  interest  of  the  payee  of  the  note, 
no  greater  right  or  interest  than  he  then  held  can  pass."  In  other 
words,  the  learned  justice  seemed  to  think  that  the  words  used 
limited  the  transfer  to  the  right  and  title  he  then  held.  While  this 
holding  appears  to  be  at  variance  with  the  cases  elsewhere,  we  think 
it  readily  distinguishable  from  the  present,  as  here  the  words  are, 
"  I  hereby  assign  the  within  note  to  Matthew  M.  Markey  and 
Catherine  Sundars, "  and  do  not  purport  to  limit  the  liability  of 
Corey  as  an  indorser.     In  Stevens  v.  Hannan  (86  Mich.  307;  48  N.  W. 

'  See  Neg.  Inst.  L.,  §  116  [66],  post.  —  Ed. 


I.  2.]  TRANSFER   BY    INDORSEMENT.  345 

951),  the  note  sued  upon  was  negotiable  in  form,  and  made  payable 
to  Batchelder,  and  he  assigned  it  before  maturity,  as  follows:  "  For 
value  received,  I  hereby  assign  all  interest  in  and  to  this  note  to 
Ralph  E.  Watson."  Defendant  insisted  in  that  case  that  the  plain- 
tiff could  not  sue  in  his  own  name,  but  should  have  sued  in  the  name 
of  the  payee.  It  was  said  by  Mr.  Justice  McGrath:  "  I  do  not 
think  the  point  well  taken.  If  Batchelder's  indorsement  did  not 
affect  its  negotiability,  then  Watson's  indorsement  entitled  the  plain- 
tiff, as  holder  of  the  note,  to  sue  in  his  own  name."  It  must  be 
held,  therefore,  that  the  memorandum  on  the  note  did  not  relieve 
Corey  from  his  liability  as  indorser. 

The  court  was  not  in  error  in  admitting  the  contract  in  evidence, 
as  its  purpose  was  to  show  that  the  note  was  not  in  fact  limited  by 
its  provisions,  and  those  provisions  of  the  contract  cited  did  not 
destroy  the  negotiability  of  the  note.     (Daniel,  Neg.  Inst.,  §  48.) 

The  judgment  must  be  affirmed.     The  other  justices  concurred.' 


§  60  [30]   Hall  v.   Toby,  iio    Pennsylvania   State,   318.  —  1S85. 
Action  by  D.  B.  Toby  as  indorsee  under  the  following  instrument 
and  assignment: 

$551.50.  Warren,  Aug.  iS,  1879. 

For  value  received  I  promise  to  pay  Wm.  Toby,  or  order,  five  hundred 
and  fifty-one  /^"^  dollars  with  interest. 

Orris  Hall. 

[On  the  back  of  this  paper  was  the  following  transfer  or  assignment]: 
For  value  received  I   hereby  assign,  transfer  and   set  over  to  D.  B.  Toby  all 
my  right,  title,  interest  and  claim  in  the  within  note. 

Wm.  Toby, 
D.  B.  Toby. 
Tionesta,  .\'('z'.  21,  1S81. 

Per  Curiam.  — This  note  was  negotiable.  It  contained  an  abso- 
lute and  unconditional  promise  to  pay  to  Wm.  Toby  or  order  the  sum 
specified.  As  no  time  of  payment  was  therein  expressed,  the  law 
adjudges  the  money  to  be  payable  immediately.  A  right  of  action 
accrued  at  once  and  would  be  barred  by  the  Statute  of  Limitations 
at  the  expiration  of  six  years  thereafter.  The  note  had  all  the 
essential  language  to  constitute  a  promissory  note. 

The  legal  right  of  action  thereon  would  have  passed  by  indorse- 

^  Accord:  Maifie  Trust,  etc.,  Co.  v.  Butler,  45  Minn.  506;  Davidson  v.  Po-vell, 
114  N.  C.  575;  Merrill  V.  Hurley,  6  So.  Dak.  592. 

Contra:  Lyons  v.  Divelbis,  22  Pa.  St.  185;  Spencer  v.  Ilalpern,  62  Ark.  595; 
Cf.  Aniba  v.   Yeomans,  39  Mich.  171.  —  Ed. 


346  NEGOTIATION.  [ART.  IV. 

ment  and  delivery.     For  purpose  of  transfer  the  assignment  on  the 
back  of  this  note  passed  the  legal  title.' 


(d)    Transfer  by  indorsing  guaranty. 
§  60  TRUST  COMPANY  v.  NATIONAL  BANK.         [§  30] 

loi  United  States,  68.  —  1879. 

Bill  to  compel  surrender  of  note.  The  note  with  security  was 
given  by  the  Wyandotte  Bank  to  the  Cook  County  National  Bank 
to  obtain  credit,  and  not  to  be  negotiated.  The  latter  did  negoti- 
ate it  to  the  Trust  Company.  At  its  maturity  there  was  due  on  it 
to  the  Cook  County  National  Bank  $132,  which  the  Wyandotte 
Bank  offers  to  pay. 

Mr.  Justice  Strong  [after  stating  the  facts]. — The  note  was 
not  indorsed  to  the  Trust  Company,  and  it  was  not,  therefore,  taken 
in  the  usual  course  of  business  by  that  mode  of  transfer  in  which 
negotiable  paper  is  usually  transferred.  Had  it  been  indorsed  by  the 
Cook  County  Bank,  it  may  be  that  the  Trust  Company  would  hold  it 
unaffected  by  any  equities  between  the  maker  and  the  payee.  But 
instead  of  an  indorsement,  the  president  of  the  Cook  County  Bank 
merely  guaranteed  its  payment,  and  handed  it  over  with  this 
guaranty  to  the  Trust  Company.  The  note  was  not  even  assigned. 
There  was  written  upon  it  only  the  following:  — 

For  value  received,  we  hereby  guarantee  the  payment  of  the  within  note  at 
maturity,  or  at  any  time  thereafter,  with  interest  at  ten  per  cent,  per  annum 
until  paid,  and  agree  to  pay  all  costs  and  expenses  paid  or  incurred  in  collecting 

the  same. 

B.  F.  Allen,  Pres  t. 

In  no  commercial  sense  is  this  an  indorsement,  and  probably  it 
was  not  intended  as  such.  Allen  had  agreed  that  the  note  should 
not  be  negotiated,  and  for  this  reason  perhaps  it  was  not  indorsed. 
That  a  guaranty  is  not  a  negotiation  of  a  bill  or  note  as  understood 
by  the  law  merchant,  is  certain.  {Snevily  v.  Ekel,  i  Watts  &  S.  [Pa.], 
203;  Lamourieux  v.  Hewitt,  5  Wend.  [N.  Y.],  307;  Miller  v.  Gaston, 
2  Hill  [N.  Y.],  188.)  In  this  case,  the  guaranty  written  on  the  note 
was  filled  up.  It  expressed  fully  the  contract  between  the  Cook 
County  Bank  and  the  Trust   Company.     Being  express,  it  can  raise 

>  Cf.  Aniba  v.  Yeomans,  39  Mich.  171.  While  the  indorsement  passes  title  it 
does  not  make  the  "  assignor  "  liable  as  an  indorser.  Lyons  v.  Divelbis,  11  Pa. 
St.  185.  Contra:  Henderson  v.  Ackelmire,  59  Ind.  540;  Adams  v.  Bleihen,  66 
Me.  19.  —  Ed. 


I.  2. J  TRANSFER    BY    INDORSEMENT.  347 

no  application  of  any  other  contract.  Expressu?n  facit  cessare  taciturn. 
The  contract  cannot,  therefore,  be  converted  into  an  indorsement 
or  an  assignment.  And  if  it  could  be  treated  as  an  assignment  of  the 
note,  it  would  not  cut  off  the  defences  of  the  maker.  Such  an  effect 
results  only  from  a  transfer  according  to  the  law  merchant;  that  is, 
from  an  mdorsement.  An  assignee  stands  in  the  place  of  his 
assignor,  and  takes  simply  an  assignor's  rights;  but  an  indorsement 
creates  a  new  and  collateral  contract.  (2  Parsons,  Notes  and  Bills, 
46  et  seq.,  notes.) 

At  best,  therefore,  the  defendants  below  can  claim  no  more  or 
greater  rights  than  those  of  the  Cook  County  Bank,  and  the  com- 
plainants are  entitled  to  a  return  of  the  note  and  of  the  collaterals  on 
payment  of  the  sum  of  $132. 

Decree  affirmed.' 

§  60  ELGIN  CITY  BANKING  CO.  v.  ZELCH.  [§  30] 

57  Minnesota,  487.  —  1S94. 

Action  by  indorsee  against  maker.  The  question  was  whether 
plaintiff  was  an  indorsee,  or  an  assignee  and  so  subject  to  the 
defence  of  fraud  or  failure  of  consideration.  The  court  directed  a 
verdict  for  plaintiff.     The  facts  appear  in  the  opinion. 

Mitchell,  J. — The  defendant  executed  his  negotiable  promis- 
sory note,  payable  to  the  order  of  one  Daniel  Dunham,  who  trans- 
ferred it  to  the  plaintiff,  with  the  following  indorsements:  "Pay 
the  Elgin  City  Banking  Co.  D.  Dunham."  "  Payment  Guaran- 
teed.    D.  Dunham." 

Whether  these  indorsements  be  construed  as  constituting  a  single 
contract,  or  two  distinct  and  separate  contracts,  we  are  clear  that 
they  constitute  an  "indorsement,"  in  the  commercial  sense,  and 
that  the  transferee  is  an  "indorsee,"  and  entitled  to  protection  as 
such,  under  the  law  merchant.  The  fact  that  Dunham  enlarged  his 
responsibility  beyond  that  of  "  indorser,"  by  guarantying  payment, 
did  not  change  or  affect  the  character  of  his  indorsement. 

Order  affirmed.' 

'Accord:  Tuttle  v.  Bartholomew,  12  Met.  (Mass.)  452;  Belcher  v.  Smith,  7 
Cush.  (Mass.)  482;   Canfieldv.   Vaughan,  8  Mart.  (La.)  683. 

Contra:  Myrick  v.  Ifasey,  27  Me.  9;  Heard  v.  Dubuque  Bank,  8  Neb.  10; 
Helmer  v.  Bank,  28  Neb.  474;  Kellogg  v.  Douglas  Co.  Bank  (Kan.),  48  Pac.  R. 
587;  Dunham  v.  Peterson,  5  N.  Dak.  414,  where  the  question  is  fully  discussed 
and  authorities  collected;  Elgin  City  Banking  Co.  v.  Zeleh,  57  Minn.  487, 
infra.  —  Ed. 

*  See  note  I,  above.  "A  guaranty  of  the  payment  of  a  note  does  not  neces- 
sarily include  a  contract  of  indorsement,  but  when  such  guaranty  is  written 
upon   the  back   of  the  note   in   general  terms  and    signed  by  the  payee  named 


348  NEGOTIATION.  [ART.  IV. 

§60  JOHNSON  t;.  MITCHELL.  [§30] 

50  Texas,  212.  —  1878. 
[Reported  herein  at  p.  369.] 


§  60  BROWN  V.  CURTISS.  [§  30] 

2  New  York,  225.  —  1849. 
[Reported  herein  at  p.  487.] 


II.  Indorsement:  form  required. 

I.  Must  be  Written  on  Instrument  or  Allonge. 
§  61  HERRING  V.  WOODHULL.  [§  31] 

29  Illinois,  92.  —  1862. 

Breese,  J.  —  The  first  point  made  in  this  case  is,  that  the  note 
was  not  properly  indorsed,  the  transfer  being  on  the  face  of  the 
note.  Literally,  indorsement  means  a  writing,  in  dorse,  upon  the 
back  of  the  bill  or  note.     But  it  is  well  established,  that  though 

therein,  the  universal  custom  is  to  treat  such  contract  of  guaranty  as  a  transfer 
of  the  title  of  the  payee  to  the  person  to  whom  the  guaranty  is  made."  National 
Bank  of  Commerce  v.  Galland,  14  Wash.  502,  505.  Such  a  guaranty  constitutes 
"  an  indorsement  of  the  note  with  an  enlarged  liability."  Domierberg  v.  Oppen- 
heimer,  15  Wash.  290.  "  I  guarantee  attorney's  fees  up  to  10  per  cent,  if  this 
note  has  to  be  collected  by  law,  and  its  prompt  payment,"  —  held  an  indorse 
ment  by  the  payee  with  an  enlarged  liability.  Pattillo  v.  Alexander^  96  Ga.  60. 
For  a  distinction  between  the  case  where  the  guaranty  is  executed  by  the  payee 
and  where  it  is  executed  by  a  third  person,  see  Vanzant  v .  Arnold,  31  Ga.  210; 
Geiser  Mfg.  Co.  v.  Jones,  90  Ga.  307.  See  title  "  Guarantor's  Liability," /t'j^, 
Art.  VI,  Div.  VII.  p.  486. 

Delivery. — "  It  has  often  been  decided,  that  the  assignment  [transfer]  of  a 
note  is  not  complete  without  a  delivery,  and  that  where  a  promissory  note  is 
found  in  the  hands  of  one  who  has  made  an  indorsement  thereon,  which,  if 
accompanied  by  delivery,  would  have  amounted  to  an  assignment  [transfer], 
the  presumption  will  be  that  the  assignment  was  never  completed,  and  that  he 
may,  even  after  suit  brought,  strike  out  such  indorsement."  Wulschner  v. 
Sells,  87  Ind.  71,  74.     Accord:   Spencer  \.  Carstarphen,  15  Colo.  445 

Non-negotiable  Instrument.  — The  indorsement  and  delivery  of  a  non-nego- 
tiable note  does  not  (independent  of  statute)  authorize  the  holder  to  bring  an 
action  in  his  own  name,  and  the  holder  is  subject  to  all  defenses  that  might  have 
been  set  up  against  his  transferror.  J\nhinson  v.  Brown,  4  Blackf.  (Ind.)  128; 
Maule  v.  Crawford,  14  Hun  (N.  Y.)  193;  post.  Art.  XVII,  Div.  I,  3,  p.  667.  —  Ed. 


II.]  INDORSEMENT:   FORM.  349 

such  is  its  import,  it  may  be  made  on  the  face  of  the  bill,'  and 
numerous  indorsements  may  be  made  on  a  separate  paper,  called  an 
allonge.  (Chit,  on  Bills,  227;  Yarborough  v.  Bank  of  England,  16 
East,  12;  Rex  v.  Bigg,  i  Strange,  18;  Story  on  Prom.  Notes, 
§121;  Gibsoji  V.  Powell,  6  Howard  [Miss.]  60.)  And  any  form  is 
sufficient  which  manifests  an  intention  to  transfer  the  note. 
{^Morris  v.  Bird^  11  Mass.  436.)     .     .     . 


§  61  FOLGER  V.  CHASE.  [§  31] 

18  Pickering  (Mass.),  63.  —  1836. 

Action  on  three  promissory  notes.     The  opinion  states  the  facts. 

Wilde,  J.,  delivered  the  opinion  of  the  Court. 

This  was  an  action  of  assumpsit  on  three  promissory  notes  of 
hand,  on  two  of  which  the  defendants  are  sued  as  executors  of  an 
indorser,  and  they  object  to  the  plaintiff's  recovery  on  these  notes, 
on  the  ground  that  no  demand  has  been  made  on  the  makers  and 
no  diligence  used  to  collect  the  debts  of  them.  These  notes,  how- 
ever, were  made  payable  at  the  Phoenix  Bank,  and  were  the  prop- 
erty of  the  bank.^  No  demand  was  necessary  except  at  the  bank; 
and  although  there  is  no  express  proof  that  the  notes  were  there, 
and  some  officer  of  the  bank  in  attendance,  at  the  times  the  notes 
fell  due,  yet  this  must  be  presumed,  and  it  was  for  the  defendants 
to  show  that  the  makers  called  at  the  place  appointed,  for  the  pur- 
pose of  making  payment.  The  testator,  by  his  indorsements, 
guaranteed  that  the  makers  would  respectively  be  at  the  bank  and 
pay  the  notes  according  to  their  tenor.  {Berkshire  Bank  ^^  Jones, 
6  Mass.  R.  525.) 

[Omitting  a  question  as  to  the  authority  of  the  bank  to  indorse.] 

As  to  the  objection,  that  the  indorsement  is  not  made  in  the  name 
of  the  corporation,  we  think  the  indorsement  by  the  cashier  in  his 
official  capacity  sufficiently  shows,  that  the  indorsement  was  made 
in  behalf  of  the  bank,  and  if  that  is  not  sufficiently  certain,  the 
plaintiffs  have  the  right  now  to  prefix  the  name  of  corporation. =" 

The  last  objection  is,  that  the  indorsement  on  one  of  the  notes 
was  not  made  on  the  back  of  the  •jri'^inal  note,  and  therefore 
amounted  only  to  an  equitable  transfer.  The  indorsement  was  made 
on  a  paper  attached  to  the  back  of  the  note  by  a  wafer,  and  it  had 


'  Accord:   Young  v.  Glover,  3  Jur.  N.  S.  637;  Haines  v.  Dubois,  30  N.  J.  L.  259; 
Shain  v.  Sullivan,  106  Cal.  208.     See  Neg.  Inst.  L.,  §  36  [17],  subsec.  6.  —  Ed. 
'  See  Neg.  Inst.  L.,  §  135  [75].  post.  —  Ed. 
3  See  Neg.  Inst.  L.,  ^  72  i\^\  post.  —  Ed. 


350  NEGOTIATION.  [ART.  IV. 

been  before  thus  attached  for  the  purpose  of  entering  thereon 
indorsements  of  payments,  the  back  of  the  original  note  having  been 
before  covered  with  indorsements;  and  several  payments  had  been 
indorsed  on  the  attached  paper,  before  the  note  was  transferred  by 
indorsement  to  the  plaintiff.  This  paper  thus  attached  had  become 
a  part  of  the  note,  and  no  good  reason  can  be  given  why  an  indorse- 
ment made  thereon  should  not  be  held  a  valid  and  legal  transfer. 
The  objection  is,  that  such  an  indorsement  is  not  sanctioned  by 
custom;  but  we  think  it  is  supported  by  the  reasons  on  which  the 
custom  was  originally  founded.  Bills  of  exchange  and  promissory 
notes  were  indorsed  on  the  back  of  the  bills  and  notes,  because  it 
was  a  convenient  mode  of  making  the  transfer,  and  in  order  that  the 
evidence  thereof  might  accompany  the  note.  Such  an  indorsement 
as  this  will  rarely  happen,  and  no  authority  to  support  it  could 
reasonably  be  expected;  but  there  is  no  authority  against  it. 

If  a  person  write  his  name  on  a  blank  paper,  to  be  used  as  an 
indorsement  of  a  note  to  be  written  on  the  other  side,  and  it  be  filled 
up  as  intended,  the  party  would  be  held  liable  as  indorser  of  the 
note,  although  such  indorsements  are  infrequent,  and  are  not 
according  to  the  customary  form  of  making  a  transfer;  but  they 
have  been  held  to  be  within  the  reason  of  the  custom,  and  are  sup- 
ported by  principle.  (Bayley  on  Bills,  92;  Violett  v.  Fatton^  5 
Cranch,  142.)' 

So  in  the  present  case,  as  there  is  no  authority  against  the  validity 
of  the  indorsement,  we  think  we  shall  violate  no  principle  in  holding 
it  to  be  a  legal  transfer  of  the  note. 

Judgment  for  the  plaintiffs. 


61  OSGOOD  V.  ARTT.  [§  31] 

17  Federal  Reporter,  575.  —  1S83. 
[Reported  herein  at  p.  375.] 


2.  Must  be  of  Entire  Instrument. 

§  62  HUGHES  V.  KIDDELL.  [§  32] 

2  Bay  (So.  Car.),  324.  —  1801. 

This  was  an  action  against  defendant  as  indorser  on  a  note  of 
hand,  in  which  there  was  a  verdict  for  defendant.     The  note  of  hand 

'  See  Neg.  Inst.  L.,  §  33  [14],  ante.  —  Ed. 


III.  I.]  SPECIAL   INDORSEMENT.  351 

in  question  was  given  by  David  Bush,  of  Camden,  to  the  defendant 
Kiddell,  for  473/.  sterling.  Kiddell  afterwards  made  the  following 
indorsement,  viz:  — 

"  I  assign  over  to  Hudson  Hughes,  the  sum  of  1,930  dollars  and 
50  cents,  as  part  of  this  note  of  hand. 

(Signed.)  Benjamin  Kiddell." 

Afterwards  he  made  another  indorsement,  and  assigned  over  the 
residue  of  said  note  [to  Hughes.]     (Signed)  Benjamm  Kiddell. 

The  court,  after  hearing  the  arguments,  refused  to  grant  a  new 
trial,  on  the  ground  that  an  indorsement  for  part  of  a  note  or  bill  is 
bad.  (Lex  Mercatoria,  445,  Carth.  466.)  And  if  so,  then  two 
vitious  indorsements  can  never  constitute  a  good  one. 

Rule  discharged 


III.  Indorsement:  kinds  of. 

I.   Special  Indorsement. 

§  64  REAMER  V.  BELL.  [§  34] 

79  Pennsylvania  State,  292.  —  1875. 

Action  by  holder  against  makers  of  a  note  payable  "  to  the  order 
of  William  Dilworth,  Jr.,"  and  indorsed:  "  Wm.  Dilworth,  Jr.— Pay 
R.  McCurdy.  Cash."  Defence,  want  of  title  in  holder  (BellY 
Judgment  for  plaintiff. 

Mr.  Justice  Paxson  delivered  the  opinion  of  the  Court. 

We  think  the  affidavit  of  defence  filed  in  this  case,  while  not  as 
specific  as  it  might  have  been,  was  nevertheless  sufficient  to  prevent 
judgment.  The  copy  of  the  note  filed  by  the  plaintiff  below  goes  to 
sustain  the  denial  of  his  title  contained  in  the  affidavit  referred  to. 
It  is  indorsed  "  Wm.  Dilworth,  Jr.;  pay  R.  McCurdy,  Cash."  This 
is  a  special  indorsement,  and  upon  its  face  conveys  no  title  to  the 
plaintiff  below. 

The  further  allegation  that  the  note  in  controversy  was  procured 

by  false  and  fraudulent  representations,  and  that  the  consideration 

thereof  has  failed,  coupled  with  the  denial  of  said  plaintiff's  title,  was 

sufficient  to  put  the  latter  upon  proof  that  he  is  a  bona  fide  holder.' 

Judgment  reversed  and  a  procedendo  awarded." 

'  See  Neg.  Inst.  L.,  §;  98  [59],  post.  —  Ed. 

*  See  also  Lawrance  v.  Fussell,  77  Pa.  St.  460.  —  Ed. 


352  NEGOTIATION.  [ART.  IV. 

2.  Blank  Indorsement. 

§  64  CURTIS  V.  SPRAGUE.  [§  34] 

51  California,  239. —  18     . 
[Reported  hereht  at  p.  26S.]  ' 


§  65  [35]  Evans  v.  Gee,  ii  Peters  (U.  S.),  80.  —  1837.  Bill  pay- 
able "  to  the  order  of  Thomas  Evans  "  was  indorsed  in  blank  by 
payee  (defendant).  Plaintiff  became  a  holder  in  due  course  and 
wrote  over  the  indorsement,  "  Pay  to  Sterling  H.  Gee."  Mr.  Jus- 
tice Wayne:  —  As  regards  the  right  of  a  bona  fide  holder  of  a  bill  to 
write  over  a  blank  indorsement  to  whom  the  bill  shall  be  paid,  at 
any  time  before  or  after  the  institution  of  a  suit  against  the  indorser, 
it  has  long  been  the  settled  doctrine  in  the  English  and  American 
courts ;  and  the  holder  by  writing  such  direction  over  a  blank  indorse- 
ment, ordering  the  money  to  be  paid  to  particular  persons,  does  not 
become  an  indorser.  (^Eden  v.  East  India  Co.,  2  Burr.  1216;  Com. 
311;  Str.  557;    Vincent  V.  Halock,  i  Camp.  6;  Smith  v.  Clarke,  Peake, 

225-)" 

§  65  BELDEN  V.  HANN.  [§  35] 

61   loWA,  42.  —  1S83. 

Question  certified  by  Circuit  Court:  Whether  a  holder  of  a  note 
under  a  blank  indorsement  may  write  above  the  indorsement  "guar- 
antee payment  at  maturity  to  bearer,  "  and  proceed  against  the 
indorser  upon  the  guaranty  without  presentment,  demand  and 
notice. 

RoTHROCK,  J.  ...  It  is  well  understood  that  the  blank 
indorsement  of  a  promissory  note  by  the  payee  creates  the  liability 
of  an  indorser  as  understood  in  the  law  merchant.  Such  indorse- 
ment creates  the  same  liability  from  the  indorser  to  the  indorsee, 
as  if  it  were  in  full.      [Bean  v.  Briggs  &=  Felthouser,  i  Iowa,  488.) 

'  "  I  see  no  difference  between  a  note  indorsed  in  blank  and  one  payable  to 
bearer.  They  both  go  by  delivery,  and  possession  proves  property  in  both 
cases."     Lord  Mansfield  in  Peacock  v.  Rhodes,  1  Doug.  633.  —  Ed. 

''Accord:  Lovell  v.  Evertson,  11  Johns.  (N.  Y.)  52.  While  it  is  proper,  it  is 
not  necessary,  for  a  holder  to  fill  up  the  indorsement  before  bringing  an  action 
or  offering  the  note  in  evidence.  Rich  v.  Starbuck,  51  Ind.  87;  Greenough  v. 
Smead,  3  Oh.  St.  415;  Palmer  v.  Nassau  Bank,  78  111.  380.  Contra:  Day  v.  Lyon, 
6  Harris  &  Johns.  (Md.)  140;  Peaslee  v.  Robbins,  3  Met.  (Mass.)  164.  —  Ed. 


III.  2.]  BLANK   INDORSEMENT.  353 

But  the  contract  of  indorsement  is  very  different  from  a  contract 
of  guaranty,  and  the  holder  of  a  note  with  a  blank  indorsement  by 
the  payee  has  no  legal  right  to  change  the  obligation  of  the  indorser, 
by  writing  a  contract  of  guaranty  over  the  name  of  the  payee, 
**  without  the  knowledge  or  consent  of  the  payee." 

What  the  rights  of  the  parties  may  be  to  show  by  parol  the  real 
contract  entered  into  by  the  indorser,  need  not  be  considered  here, 
because  no  such  question  is  certified  to  us.  We  are  required  to 
determine  the  questions  certified,  and  not  questions  of  fact  or  law 
in  the  case  which  are  not  certified,  and  we  cannot  consider  the  ques- 
tion as  to  the  rights  of  the  parties  upon  a  guaranty  upon  a  chattel 
mortgage  given  to  secure  this  note,  as  we  are  requested  to  do  by 
counsel.  Taking  these  questions  as  they  are  certified,  we  answer, 
unhesitatingly,  as  did  the  court  below,  that  the  guaranty  written 
over  defendant's  name,  without  his  knowledge  or  consent,  was  void. 

Affirmed.' 


§  65  SCOTT  V.  CALKIN.  [§  35] 

139  Massachusetts,  529. — 1885. 

Action  against  Calkin  as  maker  and  Cherrington  as  subsequent 
guarantor  of  a  note.  Cherrington's  name  was  in  blank  on  the  back 
of  the  note  and  she  defended  on  the  ground  that  she  had  received 
no  notice  of  dishonor.  Calkin  made  and  delivered  the  note,  secured 
by  mortgage,  to  Pierce  and  the  latter  indorsed  it  to  plaintiff.  Calkin 
then  sold  the  real  estate  covered  by  the  mortgage  to  Cherrington 
who  assumed  and  agreed  to  pay  the  mortgage  debt.  In  considera- 
tion of  plaintiff's  forbearance  to  foreclose  the  mortgage  Cherring- 
ton agreed  with  him  to  pay  the  note  and  signed  her  name  on  it. 
She  now  pleads  (i)  want  of  notice  as  indorser;  (2)  statute  of  fraud  as 
guarantor.'  Plaintiff  was  permitted  to  write  above  C's  name,  "  I 
guarantee  the  payment  of  the  within  note,"  and  had  judgment. 

W.  Allen,  J.  — The  indorsement  of  the  note  by  the  defendant 
Cherrington,  under  the  circumstances  proved,  imported  a  guaranty 
of  the  payment  of  the  note  to  the  plaintiff,  and  gave  him  authority 
to  write,  over  her  name,  the  contract  implied  by  law;  and  this,  if 
necessary  at  all,  could  be  done  during  the  trial.  [Josselyn  v.  Ames,  3 
Mass.  274;   Tetiney  v.  Prince,  4  Pick.  385.) 

'  The  holder  cannot  enlarge  the  liability  of  the  indorser.  Hood  v.  Robbins,  98 
Ala.  484.  —  Ed. 

^  The  consideration  need  not  be  expressed  in  a  contract  of  guaranty.  Mass. 
Pub.  St.,  c.  78,  5^  2.  —  Ed. 

NEGOT.   INSTRU.MENTS  —  23 


354  NEGOTIATION.  [ART.  IV. 

The  finding  of  the  court  renders  immaterial  tlie  question  whether 
demand  and  notice  were  necessar}'. 

Judgment  for  the  plaintiff. 


§  65  CLARKE  V.  PATRICK.  [§  35] 

60  Minnesota,  269.  —  1895. 

Canty,  J.  —  This  is  an  action  against  the  defendant  as  indorser 
of  a  negotiable  promissory  note.  The  answer  admits  the  making  of 
the  note  to  defendant,  and  the  indorsement  of  it  by  him  to 
plaintiff  for  a  valuable  consideration  before  maturity,  as  alleged  in 
the  complaint;  but  alleges  that  the  transaction  between  the  parties 
was  a  sale  by  defendant  to  plaintiff  of  the  note  and  a  mortgage  secur- 
ing the  same,  which  was  evidenced  by  a  written  assignment,  and  that 
said  indorsement  was  not  intended  by  the  parties  as  a  guaranty  of 
payment  of  the  note,  but  was  made  merely  in  aid  of  said  assignment. 
Such  written  assignment  is  not  inconsistent  with  defendant's  liability 
as  indorser,  and  it  is  well  settled  that  the  legal  effect  of  an  indorse- 
ment cannot  be  thus  varied  by  parol.'  The  answer  states  no 
defence,  and  judgment  on  the  pleadings  was  properly  ordered  for 
plaintiff. 

The  judgment  appealed  from  is  affirmed.* 


3.  Restrictive  Indorsement. 
§  66  POWER  V.  FINNIE.  [§  36] 

4  Call  (Va.),  411.  — 1797. 

Action  by  Power  against  drawer  (Finnic)  and  payee-indorser 
(Tabb)  upon  a  bill  indorsed  by  Tabb  in  these  words:  "  Pay  the 
within  contents  to  Jack  Power  only."  There  is  a  good  defence  (of 
which  evidence  is  offered  and  received  against  plaintiff's  objection), 
unless  plaintiff  is  a  bona  fide  holder  for  value.  Judgment  for  defend- 
ant.    Plaintiff  appeals. 

Roane,  Judge.  —  In  the  case  of  a  negotiable  bill  no  consideration 
is  necessary  to  be  proved,  and  the  indorsee  is  not  affected  by  the  want 

'This  does  not  apply  to  "  irregular  indorsements."  Peterson  v.  Russell,  62 
Minn.  220.     See  Neg.  Inst.  L.,  |§  113-114  [63-64]-  —  Ed. 

'  Whether  a  blank  indorsement  is  a  written  contract  and  so  not  to  be  varied 
by  parol,  or  evidence  of  a  contract  not  yet  reduced  to  writing  and  so  subject  to 
establishment  by  parol,  is  open  to  dispute,  i  Daniel  on  Neg.  Inst.,  §§  717-723. 
See/cj/,  p.  485,  note.  —  Ed. 


III.    3]  RESTRICTIVE   INDORSEMENT.  355 

of  it.  But  a  negotiable  bill  may  be  restrained  by  special  indorse- 
ment, as  was  decided  in  the  case  of  Ancher  v.  The  Bank  (Dougl. 
615);  and,  in  questions  upon  such  restrictions,  the  intent  must  be 
collected  from  the  face  of  the  indorsement  only.  An  absolute 
indorsement  imports,  upon  the  face  of  it,  a  valuable  consideration 
received,  and  that  the  payee  has  transferred  his  right;  after  which 
receipt  and  sale,  he  can  have  no  pretense  for  limiting  the  indorse- 
ment, as  it  must  be  immaterial  to  him,  to  whom  it  is  paid.  But  a 
limited  indorsement  is  a  presumptive  evidence  that  the  indorsee  is 
agent  only;  otherwise  it  would  be  his  interest  not  to  accept  of  it 
in  that  form,  as  it  would  impede  the  future  transfer  of  the  bill. 

Therefore,  whenever  such  a  prohibition  appears,  it  may,  I  think, 
be  inferred,  that  the  indorsement  was  not  intended  to  be  absolute. 
If  the  transfer  to  Power  had,  in  fact,  been  absolute,  his  interest 
would  have  prompted  him  to  object  to  the  words  restricting  the 
negotiability,  when  the  restriction  would  have  tended  to  lessen  the 
value  of  the  bill.  The  presumption,  therefore,  is  fair,  that  no  con- 
sideration was  paid  for  it:  but  that  presumption  might  have  been 
repelled  by  proving  a  consideration  actually  paid.  That,  however, 
was  not  done;  and,  therefore,  I  infer  that  Power  was  an  agent  only, 
and  not  a  purchaser.  I  think,  therefore,  that  the  evidence  was 
proper. 

Fleming,  Judge.  —  "  On  the  present  occasion,  the  endorsement 
is  to  Jack  Power  or  his  order  only;  which  furnishes  a  strong  pre- 
sumption that  he  was  but  an  agent,  and  paid  no  consideration  for 
the  bill,  as  there  is  no  evidence  to  the  contrary." 

Carrington,  Judge.  —  "  Something  must  have  been  meant  by 
this  endorsement  so  out  of  the  common  way.  It  affords  a  very 
strong  presumption  that  the  endorsee  was  an  agent  only." 

Pendleton,  President.  —  "The  word  only  which  is  not  com- 
monly used,  could  have  been  used  for  no  other  purpose  than  to 
restrict  the  negotiability  of  the  bill,  and  make  Power  an  agent." 

Judgment  affirmed.' 

'  "  If  the  words  '  to  A.  B.  only  '  were  inserted,  I  should  think  it  would  not  be 
restrictive;  at  least  it  should  be  left  to  the  jury  .  .  .  Where  a  man  says 
'  pay  to  A.,'  the  law  says  it  is  '  to  A.  or  order.'  He  then  says,  I  intend  it  should 
not  be  so.  What  signifies  what  you  intend.  The  law  intends  otherwise." 
Denison,  J.,  in  Edie  v.  East  India  Co.,  i  Wm.  Bl.  295 

"  Whether  this  indorsement  is  only  an  authority  to  A.  B.  to  receive  the  money 
tor  the  use  of  the  indorser,  or  for  his  own  use,  if  made  for  value  received,  or 
whether  in  this  last  case  the  restriction  is  not  void,  and  A.  B.  may  further 
negotiate  it,  seems  not  to  be  settled.  If  the  property  of  the  note  be  vested  in 
A.  B.,  perhaps  he  will  hold  it  with  its  negotiable  quality,  notwithstanding  the 
restriction.  But  of  this  we  give  no  opinion."  Parsons,  C.  J.,  in  Rice  v.  Steartts, 
3  Mass.  22^,  post,  p.  365.  —  Eu. 


356  NEGOTIATION.  [ART.  IV. 

g  66  LEAVITT  V.  PUTNAM.  [§  36] 

3  New  York,  494.  — 1850. 

HuRLBUT,  J.  — On  the  29th  day  of  August,  1844,  Messrs.  J.  W. 
&  R.  Leavitt  made  their  note  for  $1,570-52,  payable  to  the  order  of 
T.  Putnam  &  Co.  (the  defendants),  eight  months  after  date.  A  few 
days  after  the  maturity  of  the  note  the  defendants  indorsed  it  as  fol- 
lows: "  Pay  the  within  to  A.  Thacher,  value  received.  May  21, 
1845.  T.  Putnam  &  Co."  Thacher  indorsed  without  recourse, 
and  delivered  the  note  for  a  valuable  consideration  to  the  American 
Exchange  Bank,  in  whose  behalf  this  action  is  brought. 

On  the  trial  the  defendants  urged,  among  other  grounds  of  objec- 
tion to  the  plaintiffs'  recovery,  that  the  defendants'  indorsement 
was  in  effect  a  new  draft  payable  to  Thacher  only,  and  not  negoti- 
able, so  that  no  action  could  be  maintained  upon  it  in  the  name  of 
the  plaintiff.  In  this  they  were  sustained  by  the  court,  and  the 
plaintiff  was  nonsuited. 

The  other  objections  taken  by  the  defendants  on  their  motion  for 
a  nonsuit  were  not  considered  by  the  court  below,  and  under  the 
circumstances  of  the  case  cannot  be  noticed  on  this  appeal;  so  that 
the  only  thing  for  us  to  consider  is,  whether  the  indorsement  of  a 
note  made  after  due,  differs  from  one  made  before  maturity  in 
respect  to  its  negotiability  ? ' 

It  was  conceded  on  the  argument  that  no  express  authority  could 
be  found  sustaining  the  distinction  upon  which  the  decision  of  the 
superior  court  was  based;  but  it  was  urged  that  the  defence  could 
be  sustained  upon  the  principle  that  a  dishonored  note  loses  it  mer- 
cantile character,  and  its  indorsement  becomes  an  original  contract 
which  must  be  made  expressly  negotiable  in  terms,  or  it  could  not 
be  held  to  possess  the  character  of  negotiability.  There  is  unques- 
tionably a  difference  between  the  indorsement  of  a  note  after  due 
and  one  while  it  is  running  to  maturity,  but  this  relates  only  to  a 
single  point  arismg  from  the  necessity  of  the  case,  to  wit,  the  time 
of  payment,  which,  in  the  latter  indorsement,  is  fixed  at  a  future 
day  by  the  express  agreement  of  the  parties,  while  in  the  former,  it 
is  declared  by  law  to  be  within  a  reasonable  time,  upon  demand. 
But  in  all  other  respects  the  contract  is  the  same  as  an  indorsement 
in  the  usual  course  of  trade;  and  it  is  difficult  to  perceive  how  the 
single  difference  referred  to  can  at  all  affect  the  negotiability  of  the 
indorsement.  A  bill  or  note  does  not  lose  its  negotiable  character 
bv  being  dishonored.     If  originally  negotiable,  it  may  still  pass  from 

'  See  Neg.  Inst.  L.,  §  26  [7],  ante,  and  cases.  —  Ed. 


III.  3.]  RESTRICTIVE   INDORSEMENT.  357 

hand  to  hand  ad  infinitum  until  paid  by  the  drawer.  Moreover,  the 
indorser  after  maturity  writes  in  the  same  form  and  is  bound  only 
upon  the  same  condition  of  demand  upon  the  drawer  and  notice  of 
non-payment  as  any  other  indorser.  Thus  the  paper  preserves  its 
mercantile  existence  and  retains  the  main  attributes  of  a  proper  bill 
or  note,  and  circulates  as  such  in  the  commercial  community. 

Exceptions  to  a  general  rule  affecting  so  important  and  numerous 
a  class  of  transactions  as  the  one  under  consideration  must  be  pro- 
ductive of  great  inconvenience,  and  will  not  be  indulged  except  for 
urgent  reasons;  and  nothing  has  been  made  to  appear  in  the  argu- 
ment or  seems  to  exist  in  the  case,  which  warrants  the  court  in 
treating  the  ordinary  indorsement  of  a  dishonored  bill  or  note  as 
without  the  law  merchant  and  not  negotiable.  While  it  was  ques- 
tioned whether  such  a  note  was  negotiable,  and  whether  the  indorser 
was  chargeable  except  upon  the  usual  condition  of  demand  and 
notice,  there  was  perhaps  reason  enough  to  sustain  the  decision  of 
the  court  below.  But  since  both  the  note  and  its  indorsement,  by 
a  long  course  of  decisions,  have  been  treated  as  within  the  law  mer- 
chant in  respect  to  their  main  attributes,  the  indorsement  ought  to 
be  regarded  as  negotiable  to  the  same  extent  as  an  indorsement 
before  maturity.  The  latter  follows  the  nature  of  the  original  bill 
and  is  equally  negotiable.  {Edie  v.  East  India  Co.,  2  Burr.  1216; 
Milfordw.  Walcott,  i  Ld.  Raym.  574;  Allwoodv.  Hazelton,  2  Bailey's 
S.  C.  R.  457;  Bishop  v.  Dexter,  2  Conn.  R.  419;  Ber7y  v.  Robin- 
son, 9  John.  121.) 

The  note  in  the  present  case  was  upon  its  face  transferable,  and  its 
character  in  respect  to  negotiability  could  only  have  been  changed 
by  an  indorsement  containing  express  words  of  restriction.  The 
defendant's  indorsement  was  a  full  one,  containing  the  name  of 
the  person  in  whose  favor  it  was  made,  but  omitting  the  words  "  or 
order,"  the  legal  effect  of  which  was,  nevertheless,  to  make  the 
note  payable  to  him  or  his  order,  and  his  indorsement  therefore  was 
effectual  to  transfer  the  note  to  the  plaintiff.  (Chitty  on  Bills,  136; 
Story  on  Prom.  Notes,  §  139.) 

I  am  of  opinion  that  the  judgment  of  the  superior  court  should  be 
reversed,  and  a  new  trial  awarded. 

Judgment  reversed. 

§  66         CENTRAL  RAILROAD  v.  FIRST  NATIONAL      [§  36] 
BANK  OF  LYNCHBURG. 

73  Georgia,  383.  —  1884. 

Blandford,  Justice.  —  The  defendant  in  error  brought  its  action. 


358  NEGOTIATION.  [ART.  IV. 

for  money  had  and  received,  against  the  plaintiff  in  error,  alleging 
that  plaintiff  in  error  had  received  from  one  Mayer  and  Glauber  a 
sum  of  money  due  on  a  draft  of  which  the  following  is  a  copy: 

$276.85.  Lynchburg,  Va.,  Feb.  17,  1881. 

Sixty  days  after  date,  pay  to  the  order  of  Allen  W.  Tr.Uy,  Cashier,  two  hundred 
and  seventy-six  dollars  and  eighty-five  ceuts,  with  current  rate  of  exchange  on 
New  York,  value  received,  and  charge  the  same  to  account  of 

Hunter  &  Marshall. 
To  S.  Maver  &  Glauber, 

Albany,  Georgia. 

[On  the  back  of  the  draft  were  the  following  indorsements:  First]: 

Pay  W.  H.  Patterson,  cashier,  or  order,  for  collection   for  account  of  First 

National  Bank,  Lynchburg,  Va. 

(Signed)  Allen  W.  Tally,  Cashier. 
[Second]: 
"  Pay  to  John  A.  Davis,   agent,  or  order,  for  account  of  Citizens'   Bank  of 

Georgia,  Atlanta,  Ga. 

(Signed)  W.  H.  Patterson,  Cashier." 

The  evidence  showed  that  the  plaintiff  in  error  had  collected  this 
draft;  upon  demand  being  made  on  plaintiff  in  error  for  the  pay- 
ment of  the  money  thus  collected  by  the  attorney  for  defendant  in 
error,  payment  was  refused;  the  railroad  claimed  that  the  Citizens' 
Bank  was  indebted  to  it,  and  that  they  had  given  that  bank  credit 
for  the  amount  thus  collected.  It  was  further  shown  that  the  Citi- 
zens' Bank  had  failed  before  the  money  had  been  collected  by  the 
Central  Railroad  and  Banking  Company. 

The  court  below  held  that  the  Central  Railroad  and  Banking 
Company  was  liable  to  the  defendant  in  error,  and  this  ruling  is 
assigned  as  error. 

I.  The  qualified  indorsements  on  the  back  of  this  draft  by  the 
cashier  of  The  First  National  Bank  of  Lynchburg,  whereby  he 
directs  payment  to  be  made  to  W.  H.  Patterson,  cashier  of  the  Citi- 
zens' Bank,  or  order,  for  collection  for  account  of  First  National 
Bank,  Lynchburg,  Va.,  was  nothing  more  nor  less  than  a  warrant 
of  attorney  authorizing  the  indorsee  to  collect  the  amount  due  on 
the  draft  for  the  indorser.  It  conveyed  no  title  to  the  paper,  but 
was  notice  to  all  persons  subsequently  dealing  with  this  paper,  that 
defendant  in  error  had  not  parted  with  the  title  or  intended  to  trans- 
fer the  ownership  of  the  proceeds  to  another.  The  legal  import  and 
effect  of  the  indorsement  was  to  notify  the  plaintiff  in  error  that  the 
defendant  in  error  was  the  owner  of  the  draft,  and  that  the  Citizens' 
Bank  was  merely  its  agent  for  collection;  that  a  qualified  title  for 
this  purpose  only,  and  no  other,  was  in  the  Citizens'  Bank.  (Morse 
on  Banks,  52;  Swift  \.  Tyson,  16   Peters,  i;   i  Howard,  234;  3  Penn. 


III.  3-]  RESTRICTIVE   INDORSEMENT.  359 

Stat.   348;  22  Md.   148;   I  Wall.    166;   102  U.  S.  658;  i   Bond,  389; 
II   R.  I.  119;  51  Iowa,  15.)' 

2.  But  it  is  insisted  that  there  was  no  privity  between  these  parties 
respecting  the  transaction,  so  as  to  authorize  this  action.  When 
the  plaintiff  in  error  received  from  Mayer  &  Glauber  the  money  due 
on  the  draft,  they  received  something  which  belonged  to  the  defend- 
ants in  error;  it  was  their  money,  and  this  act  put  them  in  privity 
for  the  purpose  of  this  action.  Where  one  person  is  in  possession 
of  money  which  of  right  and  in  equity  belongs  to  another,  this  action 
may  be  maintained  for  its  recovery.  The  law  implies  a  promise  on 
the  part  of  any  person  who  has  received  the  money  of  another  to 
pay  that  person  on  demand.  The  reception  of  money  by  one  and 
the  demand  by  the  other  makes  all  the  privity  that  is  necessary  to 
maintain  this  action. 

And  we  are  clear  that  plaintiff  in  error  had  no  right  to  retain 
the  proceeds  of  this  draft  as  payment  of  or  security  for  any  balance 
which  the  Citizens'  Bank  might  be  due  it. 

Judgment  affirmed.' 


§  66  BROOK,  OLIPHANT  &  CO.  v.  VANNEST.         [§  36] 

58  New  Jersey  Law,  162.  —  1895. 

Van  Syckel,  J.  — This  is  an  action  to  recover  the  amount  due 
upon  the  following  promissory  note: 

$4,986.25.  Trenton,  N.  J.,  Jatty.  30,  1891. 

Four  months  after  date,  we  promise  to  pay  to  the  order  of  ourselves,  forty- 
nine  hundred  and  eighty-six  -^^  dollars  at  the  office  of  Wm.  B.  Brook  &  Co.,  at 
40  John  St.,  New  Y-^rk  City,  value  received. 

[Indorsed]  Brook,  Oliphant  &  Co. 

Brook,  Oliphant  &  Co. 
For  discount  and  credit  of  the  Central  Rubber  Selling  Co. 

John  H.  Britton,   Treas. 

'Accord:  Commercial  Bank  v.  Armstrong,  148  U.  S.  50;  Butchers',  etc..  Bank 
V.  Hubbell,  Wj  N.  Y.  384;  Freeman' s  Batik  v.  Natiotial  Tube  Works,  151  Mass. 
413.  —  Ed. 

■■'  If  a  bill  or  note  be  indorsed  without  rectri  ;tion  by  the  payc^  and  deposited 
in  bank  for  collection  and  the  banker  plcdgj  or  soil  it,  the  pledgee  or  buyer  g-^ts 
good  title.  Collins  v.  Martin,  i  Bosanquet  &  Puller,  64C;  Ayer  v.  Tilden,  15 
Gray  (Mass.)  178;  Bank  v.  Vanderhorst,  32  N.  Y.  553.  But  if  the  bill  or  note  be 
restrictively  indorsed  "  for  collection  "  or  "  on  account  of  A."  (indorser),  or  B. 
(a  third  person),  the  pledgee  or  buyer  gets  no  title  other  than  that  held  by  the 
bank  as  agent  or  trustee.  Treuttel  v.  Barandon,  8  Taunton,  100;  Lloyd  v  Sigour. 
ney,  5  Bingham,  525;  First  N.  B.  of  Clarion  v.  Greegg,  79  Pa.  St.  384  {semble). — Ed 


360  NEGOTIATION.  [ART.  IV. 

This  note  was  executed  by  Brook,  one  of  the  firm  of  Brook,  Oli- 
phant  &  Company,  in  favor  of  said  firm,  and  passed  to  the  Central 
Rubber  Company,  without  consideration. 

It  was  discounted  in  New  York  for  the  Central  Rubber  Company, 
and  was  taken  up  by  that  company  before  it  was  due  and  put  in  its 
safe  at  Trenton,  in  this  State. 

The  manager  of  the  Central  Rubber  Company,  after  that  and 
before  the  maturity  of  the  note,  passed  it  to  Vannest,  who  is  the 
plaintiff  below. 

The  makers  of  the  note  set  up  in  defence  in  the  trial  court  — first^ 
that  the  plaintiff  below  acquired  no  legal  title  to  the  note  under  the 
special  indorsement  of  the  treasurer  of  the  Central  Rubber  Com- 
pany; secondly,  that  the  plaintiff  below  was  not  a  bona  Jide  holder  for 
value. 

It  is  undoubtedly  true  that  if  the  note  had  fallen  into  the  hands  of 
anyone  before  it  had  reached  the  bank  which  discounted  it,  he  could 
not  have  acquired  or  passed  to  another  any  valid  title  to  it. 

The  special  indorsement  would  have  been  notice  of  an  infirmity 
in  the  holder's  title. 

But  after  that  indorsement  had  served  its  purpose,  and  the  note 
came  back  to  the  Central  Rubber  Company,  that  company,  by  pass- 
ing it  to  Vannest,  gave  him  as  good  a  title  as  if  the  indorsement 
had  not  been  special  but  general. 

The  trial  judge  properly  ruled  that  under  the  circumstances  the 
burden  was  cast  on  Vannest  to  show  that  he  was  a  bona  Jide  holder 
for  value.' 

The  circumstances  under  which  he  acquired  the  note  were  these:  — 

On  the  6th  of  May,  1891,  he  loaned  to  the  Star  Rubber  Company, 
of  which  one  Thomas  A.  Bell  was  manager,  the  sum  of  $5,000  in 
cash,  and  took  the  note  of  that  company  for  the  amount  so  loaned. 
Within  a  week  after  that  date,  Bell,  on  behalf  of  the  same  company, 
applied  to  him  for  another  loan  of  $7,000.  To  induce  Vannest  to 
make  this  loan,  Bell,  who  was  also  secretary  and  manager  of  the 
Central  Rubber  Company,  gave  to  Vannest  the  note  sued  on,  to  pay 
the  aforesaid  loan  of  $5,000,  and  thereupon,  on  the  13th  of  May, 
1891,  Vannest  loaned  the  said  sum  of  $7,000  to  the  Star  Rubber 
Company.      This  transaction  was  made  in  Trenton. 

In  Allai7-e  v.  Hartshoi-ne  (i  Zab.  665),  the  court  of  last  resort  in 
this  state  settled  the  law  to  be  that  where  one  takes  a  negotiable 
note  before  maturity  as  security  for  a  precedent  debt,  he  is  a  bona 
fide  holder,  and  may  recover  upon  it.^ 

'  Neg.  Inst.  L.,  §  98  [sqI,  post.  —  Ed. 
»  Neg.  Inst.  L,,  §  51  [25].  —  Ed. 


III.  3.]  RESTRICTIVE    INDORSEMENT.  361 

The  law  of  this  state  must  govern  this  controversy.' 

The  validity  of  a  contract  depends  upon  the  laws  of  the  state 
where  the  contract  is  made.     (^Armour  v.  McMichael,  7  Vrooni.  92.) 

But  a  transfer  of  personal  property,  which  is  valid  by  the  law  of 
the  place  where  such  transfer  is  made,  is  sufficient  to  pass  a  valid 
title  to  it.  (^Frazier  y .  Fredericks,  4  Zab.  162;  Runyon  v.  Groshon, 
I  Beas.  86.) 

The  consideration  given  by  Vannest  for  the  note  being  sufficient 
according  to  the  rule  which  obtains  in  this  state  to  constitute  him 
a  bona  fide  holder  for  value,  it  is  not  necessary  to  discuss  the  New 
York  cases. 

There  is  no  error  in  the  proceedings  below,  and,  therefore,  the 
judgment  should  be  affirmed. 


§  66  HOOK  V.  PRATT.  [§  36] 

78  New  York,  371.  —  1879. 

This  action  was  brought  by  plaintiff,  as  trustee  of  Charles  H. 
Hook,  against  defendants,  as  executors  of  the  will  of  James  P. 
Haskin,  deceased,  upon  a  draft  signed  and  indorsed  by  said  testator, 
of  which  the  following  is  a  copy: 

$5,000.  Syracuse,  N.  Y.,  September  13,  1872. 

Orrin  Welch,  Treasurer  Morris  Run  Coal  Co.  Pay  to  the  order  of  myself, 
one  year  after  date,  five  thousand  dollars,  for  value  received. 

(Signed)  J.  P.  Haskin. 
[Indorsed]         Pay  to  the  order  of  Mrs.  Mary  Hook,  35   King,  for  the  benefit 
of  her  son  Charlie. 

(Signed)  J.  P.  Haskin. 

Defendants  waived  demand  upon  the  drawee  and  notice  of  protest. 

Upon  the  trial  defendants'  counsel  moved  for  a  nonsuit,  in  sub- 
stance, upon  the  ground  that  the  indorsement  was  restrictive  and 
did  not  import  a  consideration,  but  imported  a  gift.  The  motion 
was  denied  and  said  counsel  excepted. 

Rapallo,  J.  —  The  point  mainly  relied  upon  by  the  appellant  is 
that  the  draft  and  indorsement  upon  which  this  action  is  brought  do 
not  on  their  face  import  a  consideration.  The  draft  was  drawn  by 
the  defendants'  testator  upon  the  treasurer  of  an  incorporated  com- 
pany, payable  to  the  drawer's  own  order  and  purported  to  be  for 
value  received.  It  was  indorsed  by  the  drawer  by  a  special  indorse- 
ment "  Pay  to  the  order  of  Mrs.  Mary  Hook,  for  the  benefit  of  her 


'  Neg.  Inst.  L.,  §  76  [46],  post.  —  Ed. 


362  NEGOTIATION.  [ART.  IV. 

son  Charlie."  The  appellant  claims  that  this  is  one  of  those 
restrictive  indorsements  which  do  not  purport  to  be  made  for  a 
consideration,  and  do  not  entitle  the  indorsee  to  maintain  an  action 
on  the  bill,  without  proving  a  consideration. 

As  a  general  rule  an  indorsement  of  a  negotiable  bill  which  pur- 
ports to  pass  the  title  to  the  bill  to  the  indorsee,  imports  a  considera- 
tion, and  the  burden  of  proving  want  of  consideration  rests  upon  the 
party  alleging  it.  The  restrictive  indorsements  which  are  held  to 
negative  the  presumption  of  a  consideration  are  such  as  indicate  that 
they  are  not  intended  to  pass  the  title,  but  merely  to  enable  the 
indorsee  to  collect  for  the  benefit  of  the  indorser,  such  as  indorse- 
ments "  for  collection  "  or  others  showing  that  the  indorser  is 
entitled  to  the  proceeds.  These  create  merely  an  agency,  and  nega- 
tive the  presumption  of  the  transfer  of  the  bill  to  the  indorsee  for  a 
valuable  consideration. 

But  where  the  indorsement  purports  to  pass  the  title  to  the  bill 
therein  from  the  indorser,  and  divest  him  of  all  beneficial  interest,  a 
consideration  for  such  transfer  is  presumed.  All  the  cases  cited  by 
the  counsel  for  the  appellant  rest  upon  these  principles.  The  cita- 
tion from  3  Kent  Com.,  92,  states  the  principle  to  be  that  when  the 
indorsement  is  a  mere  authority  to  receive  the  money  for  the  use 
or  according  to  the  directions  of  the  indorser,  it  is  evidence  that 
the  indorsee  did  not  give  a  valuable  consideration  for  it  and  is  not 
the  absolute  owner.  This  accords  with  the  statement  of  the  principle 
by  Wilmot,  J.,  in  Edie  v.  E.  India  Co.  (2  Burr,  1227.)  So  an  indorse- 
ment "  Pay  to  S.  W.,  or  order,  for  our  use,"  {Sigourney  v.  Lloyd,  8 
B.  &  C.  622;  s.  c.  3  Y.  &  J.  220),  was  held  to  create  a  mere  agenc}^ 
and  the  addition  even  of  the  words  "  value  received  "  to  such  an 
indorsement  has  been  held  not  to  vary  its  effect.  ( JVilson  v.  Holmes, 
5  Mass.  543.)  In  Edie  v.  East  India  Co.  (2  Burr.  1221),  the  examples 
of  restrictive  indorsements  put  by  way  of  illustration  are,  "  Pay  to 
my  steward  and  no  other  person,"  or  "  pay  to  my  servant  for  my 
use."  These  show  that  there  was  no  intention  to  pass  the  title  to 
the  bill;  and  the  same  effect  has  been  given  to  an  indorsement,  "  Pay 
to  P.  only."  It  was  held  that  these  words  indicated  that  the 
indorsee  was  agent  only,  and  paid  no  consideration  for  the  bill,  as  a 
purchaser  would  not  have  accepted  such  an  indorsement.  {Foiuer 
v.  Finnie,  4  Call  [Va.],  411.) 

But  an  indorsement  to  one  person  for  the  use  or  benefit  of  another, 
affords  no  such  indication.  The  indorser  parts  with  his  whole  title 
to  the  bill,  and  the  presumption  is  that  he  does  so  for  a  considera- 
tion. The  only  effect  of  such  an  indorsement,  by  way  of  restriction, 
is  to  give  notice  of  the  rights  of  the  beneficiary  named  in  the  indorse- 


in.  3]  RESTRICTIVE   INDORSEMENT.  363 

ment,  and  protect  him  against  a  misappropriation.'  When  a  bill  is 
indorsed  "  Pay  to  A.  or  order  for  the  use  of  B.,"  A.  cannot  pass  the 
bill  off  for  his  own  debt,  but  he  can  by  indorsing  it  transfer  the  title, 
and  will  hold  the  proceeds  for  the  benefit  of  B.,  and  be  accountable 
to  him  for  them.  {Evans  v.  Cramlington,  Carth.  5,  affirmed  in  the 
Exchequer  Chamber,  2  Vent.  309.)  In  Treuttel  v.  Barandou  (8 
Taunt.  100),  cited  by  the  appellants,  drafts  payable  to  the  drawer's 
own  order  were  indorsed  by  him  to  De  Roure  &  Co.,  or  order,  "  for 
the  account  of  Treuttel  &  Wurz. ' '  It  appeared  that  De  Roure  &  Co. 
were  the  agents  of  Treuttel  &  Wurz,  and  the  latter  were  held  entitled 
to  maintain  trover  for  the  drafts  against  a  party  to  whom  De  Roure 
&  Co.  had  pledged  them  for  their  own  debt.  There  is  nothing  in 
this  case  to  sustain  the  proposition  that  a  draft  thus  drawn  and 
indorsed  does  not  import  a  consideration,  or  that  the  indorsee  could 
not  maintain  an  action  upon  it  against  the  drawer  and  indorser  with 
out  proving  a  consideration.  The  effect  of  the  special  indorsement 
was  simply  to  give  notice  of  the  interest  of  Treuttel  &  Wurz,  and 
prevent  De  Roure  &  Co.  from  appropriating  the  drafts  to  their  own 
use.     Blaine  v.  Boidne,  (11  Rh.  I.  119),  is  to  the  same  point. 

In  the  present  case  the  indorsement  did  not  purport  to  restrain 
the  indorsee  from  negotiating  the  draft,  for  it  was  "  Pay  to  the  order 
of  Mrs.  Mary  Hook  ' '  for  the  benefit  of  her  son  Charlie.  She  was  con- 
stituted trustee  of  her  son  and  held  the  legal  title.  (3  Kent's  Com. 
89.)  The  indorsement  gave  notice  of  the  trust,  so  that  if  she  had 
passed  it  off  for  her  own  debt,  or  in  any  other  manner  indicating  that 
the  transfer  was  in  violation  of  the  trust,  her  transferee  would  take 
it  subject  to  the  trust,  but  there  was  nothing  reserved  to  the  drawer 
and  indorser.  He  retained  no  interest  in  it.  The  presumption  is 
that  the  draft  was  drawn  and  indorsed  by  him  for  a  consideration 
received  either  from  the  indorsee  or  the  beneficiary.  If  the  youth 
of  the  beneficiary  should  be  deemed  to  afford  a  presumption  that  no 
consideration  was  paid  by  him,  the  presumption  would  be  that  it 
emanated  from  his  mother.  The  facts  admitted  on  the  trial  do  not 
establish  that  the  consideration  was  illegal.  They  show  that  the  boy 
lived  with  his  mother  and  was  taken  care  of  by  her.  There  is  noth- 
ing illegal  in  an  undertaking  by  a  putative  father  to  support  his  ille- 
gitimate child,  or  to  pay  a  sum  of  money  in  consideration  of  such 
support  being  furnished  by  another,  though  it  be  the  mother  of  the 
child.  If  such  was  the  consideration  of  this  obligation,  and  it  was 
furnished  by  Mrs  Hook,  she  was  at  liberty  to  take  it,  payable  to 
herself  in  her  own  right,  or  for  the  benefit  of  her  child.  {Hicks  v. 
Gregory,  8  C.  B.  378;  Smith  v.  Roche,  6  C.  B.  [N.  S.]   223;  Nichole 

'  Neg.  Inst.  L.,  §  91  [S2],  J>os(.  —  Ed. 


364  NEGOTIATION.  [ART.  IV. 

V.  Allen,  3  C.  &  P.  36;  Jennings  v.  Brown,  9  Mees.  &  W.  496; 
Knowlman  v.  Bluett,  9  L.  R.  [Exch.]  i,  307;  Bunn  v.  Winthrop,  i 
J-  Ch.  337,  338.) 

The  judgment  should  be  affirmed.* 


§  67  Bleckley,  C.  J.,  in  FREEMAN  v.  EXCHANGE  BANK. 

[§37] 

87  Georgia,  45.  —  1891. 

I.  An  indorsement  for  collection,  or  the  like,  is  not  a  contract  of 
indorsement,  but  the  creation  of  a  power,  the  indorsee  being  a 
mere  agent  to  receive  or  enforce  payment  for  the  indorser's  use. 
(Central  Railroad  v.  First  National  Batik,  73  Ga.  383;  Tiedeman, 
Com.  Pap.,  §  268;  I  Daniel,  Neg.  Inst.,  §  698-698(d);  2  Randolph, 
Com.  Pap.,  §  724-5-6-7,  1009;  I  Morse  Banks,  §  217;  2  Id.,  §§  583, 
593;  Bolles'  Banks  and  Depositors,  §§  220,  384(e),  et  seq.;  Benj. 
Chalmers'  Bills,  Notes  and  Checks,  (2  Am.  ed.),  132;  Conunercial 
National  Bank  v.  Armstrong,  39  Fed.  Rep.  684;  [s.  C.  148  U.  S.  50]; 
National  B.  &  D.  Bank  v.  Hubbell,  117  N.  Y.   384.) 

A  suit  is  not  maintainable  by  the  indorsee  against  the  indorser. 
[White  V.  National  Bank,  102  U.  S.  658.  And  see  Lee  x.  Chillicothe 
Bank,  I  Bond,  387.) 

To  sue  other  parties  in  order  to  enforce  payment  is  deemed  within 
the  delegated  power  of  the  agent;  and  by  reason  of  the  great  favor 
shown  by  the  law  to  commercial  paper,  the  restricted  indorsee  is 
allowed  in  some  jurisdictions  to  sue  in  his  own  name.  [Wilson  v. 
Tolson,  79  Ga.  137;  Boyd\.  Corbitt,  37  Mich.  52;  2  Randolph,  Com. 
Pap.,  §  726;  Benj.  Chalmers'  Bills,  Notes  and  Checks  [2  Am.  ed.], 

^zz^  149)' 

The  maker  of  a  restricted  indorsement  can  follow  the  bill  or  its 
proceeds  over  any  number  of  subsequent  indorsements,  the  terms 
of  his  indorsement  being  notice  of  his  title.  (Elementary  Works 
QAt^A  supra:  First  Naf  I  Bank  v.  Reno.  Co.  Bank,  3  Fed.  Rep.  257; 
Bank  of  the  Metrop.  v.  First  Naf  I  Bank,  19  Id.  301 ;  First  Naf  I  Bank 
V.  Bank  of  Monroe,  33  Id.  408;  In  Re  Armstrong,  Id.  405;  Commercial 
Naf  I  Bank  v.  Hatnilton,  42  Fed.  Rep.  880.)  The  last  case  is  criti- 
cised from  the  standpoint  of  bankers,  but  only  with  reference  to 
transmitting  the  proceeds  of  collection  from  the  collecting  bank  to 

'  Whether  the  indorsement  "  pay  to  A.  B.  trustee,"  is  restrictive  see  discus- 
sion of  instruments  payable  "  to  A.  B.  trustee"  post,  p.  412.  —  Ed. 

'Contra:  Rock  County  N.  B.  v.  Hollister,  21  Minn.  385.  In  any  event,  only 
the  special  indorsee  can  sue.     Lawrance  v.  Fussell,  77  Pa.  St.  460.  —  Ed. 


III.  4]  QUALIFIED   INDORSEMENT.  365 

the  intermediary  through  whom  the  bill  was  received.  The  expert 
opinion  seems  to  be  that  transmission  according  to  custom,  by  cor- 
respondence and  proper  entries  of  debit  and  credit  founded  thereon, 
the  entries  being  made  after  collection,  will  serve  commercially,  and 
therefore  legally,  as  the  equivalent  of  paying  over  the  money  or  for- 
warding it  by  mail  or  express;  and  consequently  that  transmission 
by  such  entries,  each  bank  making  the  appropriate  entry  for  itself. 
Will  discharge  the  collecting  bank.  (See  45  Bankers'  Magazine,  241; 
4  Banking  Law  Journal,  3.)  The  learned  United  States  circuit 
judge  who  decided  the  case  which  is  thus  criticised  took  a  different 
view. 

A  deposit  of  paper  in  bank  by  a  customer,  he  indorsing  it  "  For 
deposit,"  may  operate  to  clothe  the  bank  with  title  under  certain 
circumstances.  {National  Commercial  Bank  v.  Miller,  77  Ala.  168; 
2  Morse  on  Bank,  §  577.)  But  the  general  rule  is,  that  by  a  restric- 
tive indorsement  the  depositor  retains  the  title.  (Bolles  on  Banks 
and  Depositors,  §  220.) 

[Held:  That  where  A.  deposited  a  bill  with  B.  indorsed  "for 
deposit  to  the  credit  of  A,"  and  B.  indorsed  it,  "  Pay  C.  for  collec- 
tion account  of  B,"  and  C.  collected  it,  the  funds  were  subject  to 
garnishment  in  C's  hands  by  the  creditors  of  A.,  for  as  yet  they  had 
not  actually  been  deposited  in  the  hands  of  B.  The  legal  import 
of  the  indorsement  is  to  make  B.  an  agent  for  collection  and  deposit. 
"  The  proceeds  would  be  impressed  with  A.'s  ownership  until  they 
were  actually  so  deposited."]  ' 


4.  Qualified  Indorsement. 
§  68  RICE  V.  STEARNS.  [§  38] 

3  Massachusetts,  225.  —  1807. 

Assumpsit  by  indorsee  against  makers,  upon  a  note  payable  to 
Jonathan  Symonds,  or  order,  and  indorsed  by  him  in  these  words: 
"  for  value  received  I  order  the  contents  of  this  note  to  be  paid  to 
Merrick  Rice  at  his  own  risk."  The  defendants  denied  their  signa- 
tures, and  Symonds  was  offered  as  a  witness  to  prove  the  execution 

'  There  is  some  conflict  as  to  the  legal  effect  of  an  indorsement  "  For  Deposit." 
Some  courts  hold  that  title  passes  under  such  an  indorsement.  Ditch  v.  West- 
ern N.  B.,  79  Md.  192;  s.  c,  47  Am.  St.  Rep.  375  and  note.  Others  hold  that  title 
does  not  pass,  but  that  the  bank  is  a  bailee  for  collection  until  the  money  is 
actually  in  its  hands,  when  it  becomes  a  debtor  as  in  the  usual  case  of  money 
deposits.     Beat  v.  City  oj  Somervilte,  50  Fed.  Rep.  647.  —  Eu. 


3^6  NEGOTIATION.  [ART.  IV. 

of  the  note,  and  was  objected  to  as  a  witness  on  the  ground  that  he 
was  interested.  Objection  overruled.  Judgment  for  Plaintiff. 
Defendants  appeal. 

Parsons,  C.  J.  —  The  interest  of  Symonds  must  depend  on  the 
effect  of  his  indorsement. 

A  security  negotiable  in  its  creation  must,  during  its  negotiation, 
preserve  its  negotiable  quality;  otherwise,  when  assigned,  the 
assignee  would  hold  a  contract  by  the  assignment  different  from  the 
contract  assigned.  It  is  for  this  reason  settled  that  a  negotiable 
note  indorsed  in  blank,  or  by  a  direction  to  pay  the  contents  to  A. 
B.,  omitting  the  words,  "  or  his  order,"  is  further  negotiable  by  the 
holder  under  such  indorsement.  It  is  also  settled  that  when  a 
negotiable  security  is  indorsed,  "/<?)'  f/ie  contents  to  my  usc\"  or,  "  to 
the  use  of  a  third  person, ' '  or, ' '  carry  this  bill  to  the  credit  of  a  third  per- 
son,'' such  an  indorsement  is  not  an  assignment  of  the  security,  but 
IS  only  an  authority  to  pay  the  money  agreeably  to  the  direction  of 
the  indorsement.  There  are  other  restricted  indorsements  also 
made;  as  '' pay  the  contents  to  A.  B.  only.''  Whether  this  indorse- 
ment is  only  an  authority  to  A.  B.  to  receive  the  money  for  the  use 
of  the  indorser,  or  for  his  own  use,  if  made  for  value  received,  or 
whether  in  this  last  case  the  restriction  is  not  void,  and  A.  B.  may 
further  negotiate  it,  seems  not  to  be  settled.  If  the  property  of  the 
note  be  vested  in  A.  B.,  perhaps  he  will  hold  it  with  its  negotiable 
quality,  notwithstanding  the  restriction.  But  of  this  we  give  no 
opinion. 

The  case  at  bar  is  a  restricted  indorsement  of  another  kind,  and 
which  in  practice  is  very  common.  The  promisee  of  a  negotiable 
note  indorses  it  to  a  third  person,  or  his  order,  for  value  received, 
stipulating  that  the  indorser  is  not  to  be  responsible,  if  the  maker 
does  not  pay  it.  If,  notwithstanding  this  stipulation,  the  indorser  is 
answerable,  if  the  maker  do  not  pay  the  note,  then  the  witness, 
Symonds,  is  interested,  and  ought  not  to  have  been  sworn. 

Upon  consideration  we  are  of  opinion  that  the  promisee,  indorsing 
the  note  under  this  express  stipulation,  is  not  eventually  holden  to 
pay  the  note,  if  the  maker  should  not.  As  the  promisee  had  the 
property  of  the  note,  he  might  dispose  of  it  on  what  terms  he  pleased, 
with  the  assent  of  the  purchaser,  and  the  latter  cannot  complain  of 
the  necessary  effect  of  his  own  agreement;  and  the  indorser  cannot 
be  charged  upon  his  own  contract,  directly  against  the  express 
intent  of  it.  If  this  opinion  is  correct,  Symonds,  after  this  restricted 
indorsement,  had  no  interest  in  the  event  of  the  suit,  and  was  a 
competent  witness. 

Another  point  of  some  importance  arises,  which  involves  the  ques- 


III.  5j  CONDITIONAL   INDORSEMENT.  367 

tion,  whether,  by  this  restricted  indorsement,  the  property  of  the  note 
passed  to  the  indorsee,  so  that  he  may  sue  upon  it  in  his  own  name. 
If  the  restriction  applied  to  the  quality  of  the  contract,  so  as  to 
render  a  negotiable  security  no  longer  negotiable,  there  would  be 
some  difficulty  in  allowing,  consistently  with  legal  principles,  an 
indorsement  of  this  effect  to  operate  as  a  transfer  of  the  note.  Cut 
this  is  not  the  effect  of  the  restriction;  the  note  remains  negotiable 
in  the  hands  of  the  indorsee,  although  he  has  no  remedy  against  the 
indorser;  and  in  whose  hands  soever  the  note  may  come,  the  maker 
is  still  liable,  according  to  the  terms  of  his  original  contract,  to  pay 
to  the  promisee  or  his  order.  The  note,  therefore,  being  the  absolute 
property  of  the  plaintiff,  and  Symonds  being  a  competent  witness, 
the  verdict  must  stand,  and  judgment  be  entered  accordingly. 


§  68  [38]  LoMAX  r.  PicoT,  2  Randolph  (Va.),  247,  260,  — 1824. 
Judge  Green.  —  "  An  indorsement  without  recourse  is  not  out  of 
the  due  course  of  trade.  The  security  continues  negotiable,  not- 
withstanding such  an  indorsement.  Nor  does  such  an  indorsement 
indicate,  in  any  case,  that  the  parties  to  it  are  conscious  of  any 
defect  in  the  security,  or  that  the  indorsee  does  not  take  it  on  the 
credit  of  the  other  party  or  parties  to  the  note.  On  the  contrary, 
he  takes  it  solely  on  their  credit,  and  the  indorser  only  shows 
thereby,  that  he  is  unwilling  to  make  himself  responsible  for  the 
payment." 

§  68  CLARKE  V.  PATRICK.  [§  38] 

60  Minnesota,  269.  —  1895. 
\_Reported  hcreui  at  p.  354.] 


5.   Conditional  Indorsement. 
§  69  JOHNSON  V.   BARROW.  [§  39] 

12  Louisiana  Annual,  83.  — 1857. 
Spofford,   J. — This  suit  is  brought  against  the  indorser  of  a 
promissory  note  of  the  following  tenor:  — 

Donaldsonville,  30th  Oct.,  185 1. 
One  year  after  date,  I  promise  to  pay  to  the  order  of  Robert  R.  Barrow  the  sum 
of  five  hundred  dollars,  for  value  received,  payable  at  the  office  of  the  Recorder, 

Donaldsonville. 

(Signed)  John   Huts<in. 

[The  indorsement  is  in  these  words:] 

HouMA,  Parish  of  Terrebonnk. 

I  indorse  the  within  note  for  the  benefit  of  Mrs.  Hutson  in   the  purchase  of  a 

tract  of  land  from  Gov.  H.  Johnson. 

(Signed)  R.  R.  Barrow. 


368  NEGOTIATION.  [ART.  IV. 

The  defendant  pleaded  that  this  restrictive  indorsement  does  not 
bind  him,  inasmuch  as  the  special  object  for  which  it  was  given  was 
never  consummated,  Mrs.  Hutson  not  having  purchased  a  tract  of 
land  from  the  plaintiff  Johnson. 

There  was  judgment  in  the  defendant's  favor,  and  the  plaintiff  has 
appealed. 

It  is  needless  to  recapitulate  any  other  facts  than  that  Mrs.  Hut- 
son  did  not  buy  a  tract  of  land  from  Henry  Johnson,  nor  contract  to 
do  so  in  any  manner  that  could  bind  her. 

The  condition  with  which  the  defendant  clogged  his  indorsement 
of  the  note  never  having  been  accomplished,  the  plaintiff  has  no 
action  against  him. 

The  judgment  is,  therefore,  affirmed  with  costs.* 


IV.  Indopsement:    Methods  and  efTect. 

I.   Indorsement  of  Instrument  Payable  to  Bearer. 
I  70  RIDER  V.   TAINTOR.  [§  40] 

4  Allen  (Mass.),  356.  — 1862. 

Contract  upon  the  following  promissory  note: 

$107.  Lee,  Dec.  i,  i860. 

Six  months  from  date,  for  value  received,  I  promise  to  pay  Stephen  E.Avery, 
or  bearer,  one  hundred  and  seven  dollars,  with  use. 

Albert  J.  Taintor. 
[The  note  bore  the  following  indorsement:] 
Pay  E.  A.  Bliss,  cashier,  or  order. 

Warren  Newton,  Cashier. 

At  the  trial  in  the  superior  court,  it  appeared  that  the  plaintiff  had 
purchased  the  note  in  suit  before  it  became  due  for  a  full  considera- 
tion, but  the  bill  of  exceptions  stated  that  "  there  was  no  evidence 
that  E.  A.  Bliss,  to  whom  said  note  had  been  indorsed,  had  trans- 

1  In  Robertson  v.  Kensington  (4  Taunt.  30),  the  indorsement  was  "  Pay  the 
within  sum  to  A.,  or  order,  upon  my  name  appearing  in  the  'Gazette'  as 
ensign  in  any  regiment  of  the  line,  between  the  ist  and  64th,  if  within  two 
months  from  this  date."  In  this  form  the  bill  was  accepted  by  defendants,  who 
subsequently  paid  the  bill  to  E.,  a  remote  indorsee  of  A.  The  payee's  name 
did  not  appear  in  the  '  Gazette,'  and  he  brought  an  action  against  the  acceptor. 
Held:  plaintiff  could  recover.  It  is  the  rule  of  this  case  that  is  changed  by  §  6g 
[39],  of  the  Neg.  Inst.  Law.  A  conditional  indorsement  does  not  affect  the 
negotiability  of  the  instrument.  Tappan  v.  Ely,  15  Wend.  (N.  Y.)  362.  The 
indorsee  is  a  trustee  for  the  conditional  indorser  if  the  condition  is  not 
fulfilled.  —  Ed. 


IV.]  INDORSEMENT:    METHODS   AND    EFFECT.  369 

ferred  or  indorsed  said  note  to  the  plaintiff;  "  or  "  that  the  plaintiff 
had  any  title  in  said  note  from  said  Bliss,  or  that  said  note  was  sued 
with  the  knowledge  or  assent  of  said  Bliss."  Rockwell,  J.,  ruled 
that  the  plaintiff  was  entitled  to  recover,  and  the  jury  returned  a 
verdict  accordingly;  and  the  defendant  alleged  exceptions. 

BiGELOW,  C.  J. — The  contract  of  the  promisor  of  the  note 
declared  on  is  to  pay  the  sum  due  on  the  note  at  its  maturity  to  the 
person  who  shall  then  be  the  bearer.  The  production  of  the  note 
by  the  plaintiff  is  therefore  evidence  of  his  title;  and,  accompanied 
as  it  was  in  the  present  case  with  proof  that  the  plaintiff  had  become 
the  owner  of  the  note  by  purchase  before  it  became  due,  established 
a  conclusive  right  to  recover  against  the  defendant. 

The  indorsement  of  a  third  person,  directing  the  payment  of  the 
note  to  be  made  to  the  order  of  another,  did  not  change  the  contract 
of  the  promisor,  or  enable  him  to  set  up  in  defense  that  the  plain- 
tiff's title  was  imperfect,  merely  because  he  had  not  obtained  the 
signature  of  the  person  to  whom  some  intermediate  holder  had 
ordered  the  note  to  be  paid.  {Wilbour  v.  Turner,  5  Pick.  526;  Way- 
nam  v.  Bend,  i  Camp,  175;  Story  on  Notes,  §  132.) 

Exceptions  overruled. 


§70  JOHNSON  V.  MITCHELL.  [§40] 

50  Texas,  212.  —  1878. 

The  facts  are  stated  in  the  opinion. 

Gould,  Associate  Justice. — This  suit  was  brought  by  B.  F. 
Mitchell  against  appellants,  W.  L.  Johnson  and  C.  R.  Bedford,  the 
makers  of  a  promissory  note,  payable  January  i,  1873,  to  J.  W. 
Crabtree,  or  bearer,  and  against  Crabtree,  who  had  indorsed  the  note 
as  follows:  "  I  hereby  assign  the  within  note  to  S.  L.  Gilbert  for 
value  received,  and  guarantee  the  solvency  of  the  makers  of  said 
note,  nth  of  September,  1873.     J.  W.  Crabtree." 

The  averments  of  Mitchell's  petition  as  to  his  right  or  title  to  the 
instrument  sued  on  were,  that  he  was  the  legal  holder  and  owner  of 
the  note;  that  Crabtree  sold  and  transferred  it  to  Gilbert,  setting 
out  the  assignment  as  indorsed,  and  that,  after  said  transfer,  he 
(plaintiff)  purchased  the  note  from  Gilbert,  who  transferred  it  to 
him  by  delivery.  The  only  evidence  of  ownership  introduced  by 
Mitchell  was  the  note  and  indorsement.  The  defendants  had  all 
filed  a  general  denial,  but  produced  no  evidence.  A  jury  being 
waived,  the  court  gave  judgment  against  Johnson  and  Bedford  as 
principals  and  Crabtree  as  guarantee.     Johnson  and  Bedford  asked 

NEGOT.   INSTRUMENTS  —  1\ 


370  NEGOTIATION.  [ART.  IV. 

for  a  new  trial,  claiming  that  the  evidence  was  insufficient  to  support 
the  judgment;  and  their  motion  being  overruled,  they  alone  have 
appealed. 

It  is  insisted,  on  their  part,  that  the  production  of  the  note,  trans- 
ferred as  it  was  to  Gilbert,  did  not  establish  that  Mitchell  was  the 
legal  holder  or  owner. 

As  Crabtree  does  not  complain,  the  sole  question  is  as  to  the  legal 
effect  of  possession  of  a  note  payable  to  bearer  and  indorsed  in  full 
by  the  payee,  as  against  the  makers. 

Feeling  that  uniformity  of  decision,  in  all  cases  important,  is  not 
least  so  in  questions  of  commercial  law,  and  failing  to  find  decisions 
directly  in  point,  we  have  given  the  authorities  bearing  on  the  ques- 
tion a  careful  examination. 

According  to  the  elementary  authorities,  a  bill  or  note  payable  to 
order  and  indorsed  in  blank,  so  long  as  the  indorsement  continues 
blank,  "  is  in  effect  payable  to  bearer."  (Chitty  on  Bills  [nth  ed.] 
227;  3  Kent  [9th  ed.]  side  p.  89;  Story  on  Bills,  §  60;  2  Pars,  on 
Notes  and  Bills,  p.  19,  note  w;  Edws.  on  Bills  and  Notes,  131,  269; 
I  Dan'l.  on  Neg.  Inst.  §693;  Greneatixv.  Wheeler,  6  Tex.  522; 
Wethered  v.  Smith,  9  Tex.  625;  Whithed  v.  Mc Adams,  18  Tex.  553; 
Ross  v.  Smith,  19  Tex.  172.) 

Lord  Mansfield  said,  in  Peacock  v.  Rhodes:  "  I  see  no  difference 
between  a  note  indorsed  in  blank  and  one  payable  to  bearer;  "  and 
Chancellor  Kent  said,  in  Cojiroy^i.  Warren:  "A  note  indorsed  in 
blank  and  one  payable  to  bearer  are  of  the  same  nature.  They  both 
go  by  delivery,  and  possession  passes  property  in  both  cases." 
(2  Doug.  636;  3  Johns.  Cases,  263.)  So  "  a  note  payable  to  the 
maker's  order  becomes,  in  legal  effect,  when  indorsed  in  blank,  a 
note  payable  to  bearer."  (Byles  on  Bills,  ch.  7,  p.  68;  Brown  v. 
De  Winto/i,  6  M.  G.  &  S.  [60  Eng.  Com.  Law],  336.) 

From  these  authorities,  we  conclude  that  Mitchell's  possession 
was  at  least  as  satisfactory  evidence  of  his  ownership  as  it  would 
have  been  had  the  note  been  payable  to  Crabtree  or  order,  indorsed 
in  blank  by  Crabtree,  and  then  indorsed  in  full  by  Gilbert  and  some- 
one other  than  Mitchell. 

The  negotiability  of  a  note  payable  to  bearer  is  certainly  not 
further  restrained  by  an  indorsement  in  full  than  would  be,  by  the 
same  indorsement,  the  negotiability  of  a  note  payable  to  order  and 
indorsed  in  blank  by  the  payee.  But  the  rule  is  well  settled,  that  "  if 
a  bill  be  once  indorsed  in  blank,  though  afterwards  indorsed  in  full, 
it  will  still,  as  against  the  drawer,  the  payee,  the  acceptor,  the  blank 
indorser,  and  all  indorsers  before  him,  be  payable  to  bearer,  though 
as  against  the  special  indorser  himself  title  must  be  made  through 


IV.]  INDORSEMENT:    METHODS   AND    EFFECT,  371 

his  indorsee."  (Byles  on  Bills  [5th  ed].,  109;  cited  by  Pollock  in  2 
Exch.,  infra;  Chitty  on  Bills,  228,  230a;  3  Kent,  side  p.  90;  Story 
on  Prom.  Notes,  §  139;  2  Pars,  on  Notes  and  Bills,  19,  26;  Walker 
ct  al.  V.  McDonald^  2  Exch.  [Welsby,  H.  &  G.],  531;  citing  Smith  v 
Clark,  I  Peak.  N.  P.  C.  295,  and  i  Esp.  180;  Mitchell  v.  Fuller,  15 
Penn  270;  Hide  v.  Bailey,  16  La.  213;  Little  v.  O' Brien,  9  Mass.  423; 
Dugan  V.  The  United  States,  3  Wheat,  172;  Edw's  on  Bills  and 
Notes,  275;  citing  Dolftis  v.  Frosch,  i  Denio,  367;  Savanah  National 
Bank  V.  Haskins. ) 

We  conclude,  then,  that  however  it  might  have  been  as  against 
Crabtree,  on  which  point  we  express  no  opinion,  as  against  the  makers 
of  the  note,  its  production  by  Mitchell  was  sufficient  evidence  of 
title. 

It  may  be  objected  that  the  safe  transmission,  by  mail  or  other- 
wise, of  notes  and  bills  payable  to  bearer  requires  a  different  rule 
The  answer  is,  first,  that  such  a  consideration  will  not  justify  a 
departure  by  the  courts  from  established  principles  and  precedents, 
second,  that  what  is  known  as  a  "  restrictive  "  indorsement  stops 
the  currency  of  negotiable  paper.  (Chitty  on  Bills,  232;  Story  on 
Prom.  Notes,  §  142,  et  seq.j  2  Pars,  on  Notes  and  Bills,  21;  i 
Dan'l.  on  Neg  Inst.  §  698.) 

Whilst  we  have  disposed  of  the  case  on  the  assumption  that  Crab- 
tree's  transfer  was  equivalent  to  an  indorsement  in  full  to  Gilbert  or 
order,  it  is  not  intended  to  pass  upon  that  question.'  Looking  to 
the  original  nature  of  the  note,  which  was  that  it  should  pass  by 
delivery,  and  following  what  was  long  since  said  to  be  the  settled 
rule,  "  that  the  assignment  follows  the  nature  of  the  thing  assigned," 
it  may  be  questioned  whether  that  indorsement  does  not  receive  full 
effect  by  treating  it  as  intended  to  secure  Crabtree's  liability  as 
guarantor  to  Gilbert  or  bearer.  (See  Edie  v.  East  India  Co.,  2  Burr. 
1 2 16;  Lane  v.  Krekel,  22  Iowa,  400.) 

The  judgment  is  affirmed. 

Affirmed. 


2.  Indorsement  Where  Payable  to  Two  or  More  Persons. 
§  71  DWIGHT  V.   PEASE.  [§  41] 

3  McLean,  94  {s.  c.  8  Fed.  Cas.  186).  — 1842. 
[f/.  S.  Circuit  Court,  Dist.  Mich.'\ 

Opinion  of  the  Court.  — This  action  was  brought  upon  the  fol- 
lowing promissory  note  : 

'  See  pp.  343-348,  ante. — Eu. 


372  NEGOTIATION.  [ART.  IV. 

DETROir,  /anuary  i,  1837.  Two  years  after  date,  I  promise  to  pay  to  the 
order  of  Walter  Chester,  and  Pease,  Chester  and  Co.,  one  thousand  and  five 
hundred  dollars,  for  value  received,  at  the  Farmers  and  Mechanics'  Bank  of 
Michigan,  with  interest. 

(Signed)  John  Chester. 
[Indorsed:]   Pease,  Chester  &  Co. 

[and  also]  D.  E.  Jones  Hn  blank). 

The  declaration  contained  three  counts,  to  the  first  of  which  there 
was  a  demurrer.  This  count  states  that  one  John  Chester,  on  the 
ist  of  January,  1837,  made  his  note  payable  to  order  of  Walter 
Chester,  and  Pease,  Chester  &  Co.,  and  that  Pease,  Chester  &  Co., 
under  their  partnership  name,  indorsed  and  delivered  the  said  note 
to  the  plaintiff.  John  Chester,  the  maker,  was  a  member  of  t'^'' 
firm  of  Pease,  Chester  &  Co.  Demand  of  the  note  when  due,  and 
notice  to  the  defendants,  was  proved. 

Walter  Chester,  one  of  the  promisees  in  the  note,  seems  not  to 
have  indorsed  it,  and  this  is  fatal  to  the  right  of  the  plaintiff.  The 
interest  of  the  promisees  is  joint  in  the  note,  and  not  being  in  part- 
nership, they  must  each  transfer  the  note.  (Chitty  on  Bills,  123; 
Tayl.  55;  Carvick  v.  Vickery,  Doug.  653;  J^ones  v.  Radford^  i  Camp. 
83;   21   Eng.  C.  L.  Rep.  41.) 

Only  one-half  of  the  note  was  transferred  by  the  indorsement  of 
Pease,  Chester  &  Co.,  and  this  does  not  give  a  right  to  their  or  any 
subsequent  assignee  to  sue  on  the  note.  Recourse  against  the  maker 
cannot  thus  be  divided  and  suits  multiplied.  The  plaintiff  seeks  by 
this  action  to  recover  the  full  amount  of  the  note  against  the  defend- 
ants, as  indorsers.  But  as  he  holds  but  one-half  of  the  note  under 
the  assignment,  the  indorsement,  at  most,  can  only  be  evidence  of 
that  amount. 

The  declaration  is  defective  in  not  averring  that  Walter  Chester, 
one  of  the  payees,  did  indorse  the  note.  Demurrer  sustained.  The 
plaintiff  dismissed  his  action. 


71       ALABAMA  COAL  MINING  CO.  v.   BRAINARD.    [§41] 

35  Alabama,  476.  —  i860. 
[Reported  herein  at  p.  273.] 


0/  0 


IV.]  INDORSEMENT:    iMETHODS   AND    EFFECT. 

3.  Indorsement  Where  Payable  to  Cashier,  Etc 
§  72  FOLGER  V.   CHASE,  [§  42] 

18  Pickering  (Mass.)  63.  —  1836 
[Reported  herein  at  p.  349.]  ' 


4.   Indorsement  Where  Name  Misspelled,  Etc. 

§  73  BOLLES  v.   STEARNS.  [§  43] 

II  Gushing  (Mass.),  320.  —  1853. 

From  the  auditor's  report,  it  appeared  that  Stearns  was  the  holder 
of  a  note  executed  by  Eolles  payable  to  "  John  P.  Reed,  or  order," 
and  indorsed  "Joseph  P.  Reed."  There  was,  when  the  note  was 
given,  a  person  living  in  the  same  town  whose  name  was  "  John  P. 
Reed,"  but  it  was  proved  that  the  note  was  in  fact  given  by  Bolles 
to  Joseph  P.  Reed  for  money  lent  him  by  the  latter,  and  that  it  was 
indorsed  by  Joseph  P.  Reed  to  Stearns. 

Metcalf,  J.  .  .  .  The  court  are  also  of  opinion  that  the 
note  given  by  the  plaintiff,  payable  to  John  P.  Reed,  or  order,  and 
indorsed  to  the  defendant  by  Joseph  P.  Reed,  cannot  be  allowed  to 
the  defendant  by  way  of  set-off.  That  note,  though  given  for 
money  lent  to  the  plaintiff  by  Joseph  P.  Reed,  was  made  payable, 
not  to  him,  but  to  John  P.  Reed,  a  person  /;/  esse.  Now  it  is  certain 
that  the  legal  interest  in  that  note  was  not  transferred  to  the 
defendant  by  Joseph  P.  Reed's  indorsing  his  name  on  it.  He  was 
not  the  payee  nor  the  legal  representative  of  the  payee.  And  a 
transfer  by  indorsement  can  be  made  in  the  first  instance  only  by 
the  payee,  or  by  some  one  claiming  in  his  right,  as  his  executor, 
administrator,  or  assignee  in  bankruptcy  or  insolvency.  (Kyd  on 
Bills  [ist  Amer.  ed.],  106,  107.)     If  there  had  been  no  such  person 

'  See  note  p.  320,  ante.  "  The  usage  is  universal  for  presidents  and  cashiers 
of  incorporated  companies,  acting  as  the  executive  officers  and  agents  of  such 
companies,  to  make,  in  their  behalf,  indorsements  and  transfers  of  negotiable 
paper,  by  simply  indorsing  their  names,  with  the  additions  of  their  titles  of 
office.  I  cannot  doubt  that  such  an  indorsement  is  sufficient  to  charge  the  cor- 
poration under  whose  authority  the  indorsement  is  made,  and  to  transfer  the 
note  to  the  indorsee,  so  that  the  latter  can  maintain  an  action  thereon  in  his 
own  name."     Hall,  J.,  in  State  Bank  v.  Fox,  3  Blatch.  (U.  S.)  431.  —  Ed. 


374  NEGOTIATION.  [ART.  IV. 

as  John  P.  Reed,  perhaps  the  note  might  have  been  regarded  as  pay- 
able to  bearer,  and  might  have  been  passed  to  the  defendant  by- 
delivery,  as  if  it  had  in  terms  been  made  payable  to  bearer.  Of 
this,  however,  we  give  no  opinion.  But  as  the  note  was  made  pay- 
able not  to  a  fictitious  person,  but  to  a  person  in  being,  the  indorse- 
ment of  a  third  person  transferred  no  legal  title  to  it. 

If  the  indorsement  and  delivery  of  this  note  to  the  defendant  by 
Joseph  P.  Reed,  could  be  regarded  as  an  equitable  assignment  of  it, 
still  the  defendant  would  not  be  entitled  to  set  it  off  against  the 
plaintiff's  claim  on  him,  because  it  is  not  shown  that  notice  of  such 
assignment  was  given  to  the  plaintiff  before  this  action  was  com- 
menced.    (Rev.  Sts.,  c.  96,  §  5.) 

[Set-off  on  the  note  not  allowed.] 


5.   Indorsement  in  Representative  Capacity. 

74  SCHMITTLER  7'.  SIMON.  [§  44] 

loi  New  York,  554.  —  1886. 
\^Reported  herein  at  p.  183.]  ' 


6.   Presumption  as  to  Time  of  Indorsement. 

§   75    [45]    Ranger  v.    Gary,    i    Metcalf  (Mass.),    369.  — 1840. 

Dewey,  J.  —  The  instructions  of  the  court  of  common  pleas,  to 
which  exceptions  were  taken,  embraced  substantially  the  following 
propositions:  i.  That  the  burden  of  proof  was  on  the  defendants 
to  show  that  the  note  was  transferred  after  it  was  due  and  when  dis- 
honored, if  they  would  avail  themselves  of  a  defence  only  open  to 
them  as  upon  a  dishonored  note.  .  .  .  Upon  the  first  point, 
the  law  is  very  fully  settled  according  to  the  rule  stated  by  the 
judge  at  the  trial.  A  negotiable  note  being  offered  in  evidence, 
duly  indorsed,  the  legal  presumption  is  that  such  indorsement  was 
made  at  the  date  of  the  note,  or  at  least  antecedently  to  its  becom- 
ing due;  and  if  the  defendant  would  avail  himself  of  any  defence 
that  would  be  open  to  him  only  in  case  the  note  was  negotiated  after 
it  was  dishonored,  it  is  incumbent  on  him  to  show  that  the  indorse- 
ment was  in  fact  made  after  the  note  was  overdue. 

'  See  note,  p.  320,  ante.  —  Ed. 


v.]  TRANSFER   WITHOUT   INDORSEMENT.  375 

7.  Presumption  as  to  Place  of  Indorsement. 
§  76  BROOK,  OLIPHANT  &  CO.  v.  VANNEST.         [§  46] 

58  New  Jersey  Law,  162.  — 1895. 
[Heported  herein  at  p.  359.] 


8.  Continuation  of  Negotiable  Character. 
77  LEAVITT  r.  PUTNAM.  [§47] 

3  New  York,  494.  —  1850. 
[Reported  herein  at  p.  356.] 


9.  Striking  Out  Indorsement. 

78  CURTIS  V.  SPRAGUE.  [§  48] 

51  California,  239.  —  1876. 
\_Reported  herein  at  p.  268.]  * 


V.  Transfer  without  indopsement. 

§  79  OSGOOD  V.  ARTT.  [§  49] 

17  Federal  Reporter,  575.  —  1883. 
\_From  Circuit  Court,  N.  D.  Illinois.^ 

Artt  gave  the  R.  &  M.  R.  Co.  his  negotiable  note  for  $2,500 
secured  by  mortgage.  The  R.  &  M.  R.  Co.  gave  Osgood  a  bond  for 
$2,500  and  in  it  "assigned  and  transferred  "  Artt's  note  and  mort- 
gage as  security,  and  specified  that  "  said  note  and  mortgage  are 
hereto  appended."  The  bond,  note  and  mortgage  were  attached 
firmly  together  with  eyelets  in  the  order  named.  Each  had  the 
number  1964  written  on  it.  Osgood  at  this  time  had  no  notice  of 
any  defense  to  Artt's  note.     Subsequently  Osgood  learned  of  the 

'  If  the  note  is  indorsed  by  the  payee  and  by  subsequent  holders,  but  comes 
again  into  the  hands  of  the  payee,  he  may  strike  out  the  indorsements.  Berney 
V.  Steiner  Bros.,  108  Ala.  iii;  Middlcton  v.  Griffith,  57  N.  J.  L.  442.  —  Ed. 


3/6  NEGOTIATION.  [ART.  IV. 

defense  (failure  of  consideration  and  fraud),  and  thereafter  the  R.  & 
M.  R.  Co.  indorsed  the  note  by  writing  its  name  upon  the  baclc. 

Harlan,  J.,  (after  stating  the  facts). — These  facts  have  been 
especially  found  by  a  jury,  and  the  sole  question  for  determination  is 
whether,  upon  this  finding,  the  plaintiffs  are  entitled  to  judgment. 
The  only  issue  of  fact  made  on  the  third  plea  is  whether  Osgood, 
prior  to  the  indorsement  of  the  note,  had  notice  of  the  alleged  fraud 
and  failure  of  consideration. 

1.  It  is  a  settled  doctrine  of  the  law  merchant  that  the  bona  fide 
purchaser  for  value  of  negotiable  paper,  payable  to  order,  if  it  be 
indorsed  by  the  payee,  takes  the  legal  title  unaffected  by  any  equi- 
ties which  the  payer  may  have  as  against  the  payee. 

2.  But  it  is  equally  well  settled  that  the  purchaser,  if  the  paper 
be  delivered  to  him  without  indorsement,  takes,  by  the  law  mer- 
chant, only  the  rights  which  the  payee  has,  and  therefore  takes  sub- 
ject to  any  defense  the  payer  may  rightfully  assert  as  against  the 
payee.  The  purchaser  in  such  case  becomes  only  the  equitable 
owner  of  the  claim  or  debt  evidenced  by  the  negotiable  security, 
and,  in  the  absence  of  defense  by  the  payer,  may  demand  and  receive 
the  amount  due,  and,  if  not  paid,  sue  for  its  recovery,  in  the  name 
of  the  payee,  or  in  his  own  name,  when  so  authorized  by  the  local 
law. 

3.  As  a  general  rule  the  legal  title  to  negotiable  paper,  payable  to 
order,  passes,  according  to  the  law-merchant,  only  by  the  payee's 
mdorsement  on  the  security  itself.  The  only  established  exception 
to  this  rule  is  where  the  indorsement  is  made  on  a  piece  of  paper,  so 
attached  to  the  original  instrument  as,  in  effect,  to  become  part 
thereof,  or  be  incorporated  into  it.  This  addition  is  called,  in  the 
adjudged  cases  and  elementary  treatises,  an  allonge.  That  device  had 
its  origin  in  cases  where  the  back  of  the  instrument  had  been 
covered  with  indorsements,  or  writing,  leaving  no  room  for  further 
mdorsements  thereon.  But,  perhaps,  an  indorsement  upon  a  piece 
of  paper,  attached  in  the  manner  indicated,  would  now  be  deemed 
sufficient  to  pass  the  legal  title,  although  there  may  have  been,  in 
fact,  room  for  it  on  the  original  instrument. 

4.  But  neither  the  general  doctrines  of  commercial  law,  nor  any 
established  exception  thereto,  make  words  of  mere  assignment  and 
transfer  of  such  paper  —  contained  in  a  separate  instrument,  exe- 
cuted for  a  wholly  different  and  distinct  purpose  —  equivalent  to  an 
indorsement  within  the  rule,  which  admits  the  payor  to  urge,  as 
against  the  holder  of  an  unindorsed  negotiable  security,  payable  to 
order,  any  valid  defense  which  he  has  against  the  original  payee. 

5.  The  transfer  of  the  note  in  suit,  by  words  of  assignment  in  the 


v.]  TRANSFER   WITHOUT   INDORSEMENT.  377 

body  of  the  railroad  company's  bond,  did  not,  in  tlie  judgment  of  the 
court,  amount  to  an  indorsement  of  the  note,  although  the  bond, 
note,  and  mortgage  were  originally  fastened  together  by  eyelets. 
The  facts  set  out  in  the  third  plea,  and  sustained  by  the  special  find- 
ing, constitute,  therefore,  a  complete  defense  to  the  action,  unless, 
as  contended  by  plaintiffs,  the  subsequent  indorsement,  in  form,  by 
the  railroad  company,  after  Osgood  was  informed  of  Artt's  defense, 
has  relation  back  to  the  time  when  the  former,  without  notice  of 
such  defense,  purchased  the  note  for  value  then  paid.  If,  at  the 
time  of  Osgood's  purchase,  it  had  been  agreed  that  the  company 
should  indorse  the  note,  but  the  indorsement  was  omitted  by  accident 
or  mistake  or  fraud  upon  the  part  of  the  company,  a  different  ques- 
tion would  have  been  presented.  In  such  case,  the  company  might, 
perhaps,  have  been  compelled  to  make  an  indorsement  which  would 
have  been  deemed  effectual  as  of  the  time  when,  according  to  the 
intention  of  the  parties,  it  should  have  been  made.  But  no  such 
case  is  presented  by  the  special  finding.  It  is  entirely  consistent 
with  the  facts  found  that  the  indorsement  by  the  company  was  an 
afterthought,  induced  by  notice  of  Artt's  defense,  and  was  not 
within  the  contemplation  or  contract  of  the  parties  when  Osgood 
purchased  the  bond.  Moreover,  and  as  a  circumstance  significant 
of  an  intention  to  restrict,  in  some  degree,  the  assignability  of  the 
note  and  mortgage,  it  is  expressly  stipulated,  in  the  company's  bond, 
that  they  are  transferable  in  connection  with  the  bond,  and  not 
otherwise. 

I  am  of  opinion  that  the  facts  which  came  to  Osgood's  knowledge 
prior  to  the  indorsement,  and  which,  in  substance,  constitute  the 
defense  set  out  in  the  third  plea,  furnished  notice  that  the  company 
had,  by  reason  of  fraud  and  failure  of  consideration,  lost  its  right  to 
demand  payment  of  the  note  from  Artt.  By  the  indorsement,  after 
such  notice,  Osgood  could  not  acquire  any  greater  rights  than  the 
company  possessed.  He  did  not  become  the  holder  of  the  note  by 
indorsement,  as  required  by  the  law-merchant,  until  after  he  had 
notice  that  the  company  could  not  rightfully  pass  the  legal  title,  so 
as  to  defeat  Artt's  defense. 

While  the  adjudged  cases  are  not  in  harmony  upon  some  of  these 
propositions,  the  conclusions  indicated  are,  in  the  opinion  of  the 
court,  consistent  with  sound  reason,  and  are  sustained  by  the  great 
weight  of  authority.  (Chief  Justice  Marshall  in  Hopkirk  v.  Page,  2 
Brock,  41;  Stiirges  Sons  v.  Met.  Nat.  Bank.,  49  111.  231;  Mclrndy 
V.  Keen,  89  111.  404;  Haskell  ".  Brown,  65  111.  37;  Lancaster  A'at. 
Bank  v.  Taylor,  100  Mass.  24;  Bacon  v.  Cohea,  12  Smedes  &  M.  522; 
Grand  Gulf  Bank  v.  Wood,   Id.   482;   Clark  v.  Whitakcr,    50   N.    H. 


3/8  NEGOTIATION.  [ART.  IV. 

474;  Haskell  V.  Mitchell,  53  Me.  468;  Franklin  v.  Tivogood,  18  Iowa, 
515;  French  v.  Turner,  15  Ind.  59;  Folger  v.  Chase,  18  Pick.  63; 
Whistler  v.  Forster,  14  C.  B.  246  (108  E.  C.  L.  248);  Harrop  v. 
Fisher,  10  C.  B.  [N.  S.]  106;  G^//^.y^;/  v.  Minet,  i  H.  Bl.  s.  p.  606; 
Story,  Notes,  §  120;  Story  Bills,  §  201;  Chitty,  Bills  [12th  Amer. 
from  9th  Lond.],  252;  2  Pars.,  Notes  and  Bills,  i,  17,  18;  i  Daniel, 
Neg.  Inst.  [3d  ed.],  §§  664a,  689a,  690,  741,  and  748a.)  The  facts 
specially  found  do  not  authorize  a  judgment  for  the  plaintiff.' 


VI.  Retransfer  to  prior  party. 

§  80  CURTIS  V.  SPRAGUE.  [§  50] 

51  California,  239. —  1S76. 
[Reported  herein  at  p.  268.] 


BROOKS,  OLIPHANT  &  CO.  v.  VANNEST. 

58  New  Jersey  Law,  162.  —  1895. 
[Reported  herein  at  p.  359.]^ 

'  "  Griffith  having  defrauded  the  defendant  of  the  bill,  he  could  pass  no  right 
by  merely  handing  over  the  bill  to  another.  According  to  the  law-merchant, 
the  title  to  a  negotiable  instrument  passes  by  indorsement  and  delivery. 
A  title  so  acquired  is  good  against  all  the  world,  provided  the  instrument  is 
taken  for  value  and  without  notice  of  any  fraud.  The  plaintiff's  title  under  the 
equitable  assignment  here,  therefore,  was  to  be  rendered  valid  by  indorsement: 
but,  at  the  time  he  obtained  the  indorsement,  he  had  notice  that  the  bill  had 
been  fraudulently  obtained  by  Griffiths  fiom  the  defendant,  and  that  Griffiths 
had  no  right  to  make  the  indorsement.  Assuming,  therefore,  that  there  may  be 
conflicting  equities  between  the  plaintirf  and  the  defendant,  I  think  the  right 
should  prevail  according  to  the  rule  of  law,  and  that  the  plaintiff  had  no  title  as 
transferee  of  the  bill  at  all."  Erie,  C.  J.,  in  Whistler  v.  Forster,  14  C.  B.  N.  S. 
248.  —  Ed. 

'^  See  post.  Art.  IX.  p.  571,  Div.  I.  i.  See  §  202  [i2i'\,  post.  If  an  indorser 
reissue  the  paper  after  maturity  without  striking  out  his  indorsement  he 
remains  liable  and  is  estopped  to  require  a  new  presentment  and  demand. 
IVilliavis  V.  Matthezvs,  3  Cow.  (N.  Y.)  252;  St.  John  v.  Roberts,  31  N.  Y. 
441.  — Ed. 


ARTICLE  V. 

Rights  of  Holder. 
I.  To  sue  and  to  receive  payment. 

§  90  BISHOP,   Executor,  v.  CURTIS.  [§  51] 

21  Law  Journal,  Q.  B.,  391.  —  1852. 

Assumpsit.  Count  on  a  promissory  note  made  by  defendant  for 
1,000/.,  payable  on  demand  to  E.  Curtis  (deceased).  Plea,  that  the 
payee  had  by  his  will  bequeathed  the  note  to  his  son,  Charles  Curtis; 
that  plaintiff  had  probated  the  will  and  assented  to  the  bequest; 
that  Charles  Curtis  had  subsequently  been  convicted  of  felony  by 
reason  of  which  his  interest  was  forfeited  to  the  crown.  The  repli- 
cation merely  set  out  verbatim  the  probate  of  the  will.  Special 
demurrer  to  the  replication,  and  joinder  in  demurrer. 

Maxwell,  in  support  of  the  demurrer.  —  The  question  is,  whether 
the  plea  discloses  a  good  defence  to  the  action.  First,  by  the  will 
of  E.  Curtis,  made  since  the  passing  of  the  Wills  Act  (i  Vict.  c.  26), 
the  right  of  suing  on  this  promissory  note  passed  to  C.  Curtis.  That 
act  enables  any  person  to  bequeath  by  will  all  personal  estate  which 
he  is  entitled  to,  either  at  law  or  in  equity,  at  the  time  of  his  death, 
which,  if  not  so  bequeathed,  would  devolve  upon  his  e.xecutor  or 
administrator. 

[Lord  Campbell,  C.  J.  —  It  does  not  make  any  kind  of  personalty 
bequeathable  which  was  not  so  before,  as  it  does  as  to  realty.] 

Section  i  defines  personal  estate  as  including  debts  and  choses  in 
action,  which  it  places  in  the  same  category  as  chattels.  A  chose  in 
action  could  formerly  only  have  been  assigned  in  equity,  but  now  it 
may  be  passed  by  will.  The  right  of  suing  on  this  promissory  note 
is  a  chose  in  action,  which,  if  not  bequeathed,  would  devolve  on  the 
executor  or  administrator,  and,  therefore,  it  passes  by  the  will. 

[Crompton,  J.  — According  to  that,  it  would  vest  in  the  legatee 
without  any  assent  of  the  executor.] 

The  legatee  would  no  doubt  take  this,  as  he  would  any  chattel, 
subject  to  the  paramount  right  of  the  executor  to  require  it  for  the 
payment  of  debts.  But  the  plea  alleges  that  the  executor  assented, 
and  so  that  point  does  not  arise. 

[379] 


38o  RIGHTS   OF   HOLDER.  [ART.  V. 

[Crompton,  J.  — No;  the  assent  would  pass  the  property  in  the 
note,  but  not  the  right  of  suing  upon  it.] 

The  meaning  of  the  Wills  Act  must  be,  that  the  legatee  is  to  take 
all  that  the  executor  would  take,  that  is,  the  right  of  property  and 
the  right  of  suing. 

[Coleridge,  J.  —  How  would  the  legatee  have  sued  on  the  note?] 

He  would  allege  that  by  the  bequest  the  right  of  suing  passed  to 
him,  and  show  that  the  executor  assented. 

[Lord  Campbell,  C.  J.  — The  will  says  the  note  is  not  to  be  put 
in  suit  until  a  certain  time:  would  the  legal  right  vest  in  the  legatee 
in  the  interval?] 

That  must  be  the  effect  of  the  bequest.  But,  secondly,  even  if 
the  right  of  suing  on  the  note  did  not  pass  to  Charles  Curtis,  still  he 
had  the  equitable  interest  in  it;  and  the  crown  took  it  on  his 
conviction. 

[Lord  Campbell,  C.  J.  —  Is  there  any  authority  for  that?] 

In  Haiukins,  P.  C.  b.  2,  c.  49,  s.  9,  it  is  said,  "  all  things  whatso- 
ever which  are  comprehended  under  the  notion  of  personal  estate, 
whether  they  be  in  action  or  possession,  which  the  party  has  in  his 
own  right,  are  liable  to  forfeiture;  and  so,  a  bond  taken  in  another's 
name,  or  a  lease  made  to  another  in  trust  for  a  person  who  is  after- 
wards convicted  of  treason  or  felony,  are  as  much  liable  to  be  for- 
feited as  a  bond  made  to  him  in  his  own  name,  or  a  lease  in 
possession."  Bullock  v.  Dodds,  2  B.  &  Aid.  258,  decides  that  to  an 
action  on  a  bill  of  exchange  the  attainder  of  the  plaintiff  may  be 
well  pleaded.  The  prerogative  of  the  crown  extends  so  as  to  take 
the  right  of  suing  on  this  note,  in  which  the  convict  was  beneficially 
interested. 

Hoggins,  who  appeared  for  the  plaintiff,  was  not  called  upon  to 
argue. 

Lord  Campbell,  C.  J.  — This  plea  is  clearly  bad.  It  is  said  that 
the  property  in  and  right  of  suing  upon  this  promissory  note  passed 
to  Charles  Curtis  by  virtue  of  the  i  Vict.  c.  26.  It  is  admitted  that 
before  that  act  such  property  and  right  of  suing  would  not  have 
passed  to  a  legatee.  But  that  act  never  was  intended  to  have  any 
operation  to  make  anything  bequeathable  as  personal  estate  which 
might  not  have  been  previously  bequeathed.  It  only  provides  a 
mode  for  executing  wills,  and  with  respect  to  real  estate  a  clause  is 
introduced  making  things  devisable  which  before  were  not  so,  such 
as  rights  of  entry,  which  may  now  pass  by  will.  But  there  is  nothing 
to  indicate  an  intention  of  enabling  a  party  to  bequeath  a  chose  in 
action   so  as   to  pass  the  right  of  suit.     Therefore,  before  the  con- 


I.]  TO    SUE   AND    RECEIVE    PAYMENT.  38 1 

viction  of  Charles  Curtis,  it  seems  quite  clear  to  me  that  the  right 
of  suing  upon  this  note  was  in  the  executor,  and  not  in  Charles 
Curtis.  Then,  his  conviction  did  not  take  that  right  out  of  the 
executor  and  vest  it  in  the  Crown.  The  executor  became  a  trustee 
for  the  Crown  in  this  note,  but  the  interest  of  Charles  Curtis  did 
not  pass  to  the  Crown. 

Coleridge,  J.  — The  Wills  Act  does  not  extend  the  power  of  dis- 
posing by  will,  so  as  to  change  an  equitable  into  a  legal  interest. 
Therefore,  Charles  Curtis  must  have  sued  on  this  note  in  the  name 
of  the  executor,  and  the  right  of  suing  did  not  pass  to  the  Crown 
on  his  conviction. 

Erle,  J.  and  Crompton,  J.,  concurred. 

Judgvient  for  the  Plaintiff. 


§  90  [51]  Crist  v.  Crist,  i  Ind.  570  (1849).  Blackford,  J.  — 
This  is  a  suit  by  an  executor  on  notes  given  by  the  defendant  to  the 
testator.  The  defence  is,  that  the  notes  and  mortgage  were  speci- 
fically bequeathed  to  one  William  Crist,  in  whose  name  the  suit 
should  have  been  brought.  We  have  shown  that  the  notes  and 
mortgage  are  part  of  the  personal  estate  of  the  testator,  and  that, 
supposing  them  to  have  been  specifically  bequeathed  by  him,  they 
cannot  be  said  to  be  the  property  of  the  legatee  until  the  executor 
shall  have  assented  to  the  legacy.  No  such  assent  being  shown,  the 
defence  must  fail.  A  debtor  to  an  estate,  where  the  debt  has  been 
specifically  bequeathed  by  the  testator,  cannot,  before  the  executor 
has  assented  to  the  legacy,  say  to  the  latter,  "  I  will  not  pay  you." 
(^Bank  of  England  \.  Parsons,  5  Ves.  665.)  Whether,  if  the  executor 
had  assented  to  the  legacy,  the  suit  on  the  notes  should  still  not  be 
in  his  name,  we  have  not  examined.' 

'  Property  in  a  negotiable  instrument  payable  to  a  feme  sole  vests  upon  her 
marriage  in  her  husband,  and  he  alone  is  entitled  to  maintain  an  action  upon  it 
or  to  transfer  it  by  indorsement.  McNeilage  v.  Holloway,  i  B.  &  Aid.  218; 
Evans  V.  Secrest,  3  Ind.  545;  Sutton  v.  Warren,  10  Mete.  (Mass.)  451;  Holli field 
V.  Wilkinson,  54  Ala.  275.  Yet  it  is  not  strictly  a  chattel  since  if  he  fail  to  reduce 
it  to  possession  during  coverture,  it  survives  to  the  wife  upon  his  death  to  the 
exclusion  of  his  executors.  Wilder  v.  Aldrich,  2  R.  I.  518;  Allen  v.  Wilkins, 
3  Allen  (Mass.)  321.  It  is  also  held  that  the  husband  and  wife  may  sue  jointly 
on  the  instrument.  Philliskirk  v.  Pluckwell,  2  M.  &  Sel.  393.  The  courts 
seem,  therefore,  to  treat  the  instrument  in  such  cases  neither  strictly  as  a 
chattel  nor  yet  as  a  chose  in  action.  —  Ed. 


382  RIGHTS   OF    HOLDER.  [ART.  V. 

§  90  HAYS   V.    HATHORN.  [§51] 

74  New  York,  486.  —  1878. 

Action  on  a  promissory  note  alleged  to  have  been  made  by 
defendants  (Hathorn  &  Southgate),  payable  to  the  order  of  one  of 
them  (Frank  H.  Hathorn),  and  by  him  indorsed  in  blank  and  trans- 
ferred to  plaintiff.     Judgment  for  plaintiff. 

Hand,  J.  —  In  their  answer,  the  defendants  denied  that  the  note 
on  which  the  action  was  brought  was  ever  transferred  to  the  plaintiff 
or  that  he  was  the  legal  owner  or  holder  thereof.  They  further 
denied  that  the  plaintiff  was  the  real  party  in  interest;  alleged  that 
the  Saratoga  County  Bank  was  the  real  party  in  interest  and  the 
owner  and  holder  and  should  be  the  plaintiff,  and  that  the  note  was 
duly  transferred  to  it  instead  of  to  the  plaintiff.' 

Upon  the  trial,  the  plaintiff  having  produced  the  note  which  was 
payable  to  the  order  of  F.  H.  Hathorn  and  indorsed  in  blank  by  him, 
rested.  The  defendants  then  offered  to  prove  that  the  note  "  was 
not  the  property  of  the  plaintiif,  that  the  same  was  never  transferred 
to  him,  that  he  was  not  the  real  party  in  interest,  that  the  note  was 
the  property  of  the  Savings  Bank  who  is  the  real  party  in  interest." 
The  evidence  was  objected  to  by  the  plaintiff  as  immaterial  and  was 
excluded.  This  ruling  I  think  was  erroneous  and  renders  necessary 
a  reversal  of  the  judgment. 

Under  the  answer  and  this  offer,  the  defendants  unquestionably 
proposed  to  show  substantially  that  the  plaintiff  had  no  title  legal 
or  equitable  to  the  note,  and  no  right  as  owner  to  its  possession. 
This  might  have  been  done  by  proving  that  he  was  the  mere  finder 
or  the  unlawful  possessor,  or  that  the  right  to  its  possession  and 
ownership  was  in  the  bank  to  whom  they  were  liable  thereon,  or  in 
some  other  way.      This  they  had  a  right  to  show. 

It  may  be  that,  had  their  offer  been  admitted,  they  would  have 
produced  in  fact  no  evidence  to  sustain  it  or  prevent  a  recovery, 
but  in  considering  the  validity  of  their  exception  to  the  exclusion, 
we  must  assume  that  the  evidence  would  have  fully  covered  the 
propositions  contained  in  the  offer.  And,  as  remarked  in  the  dis- 
senting opinion  in  the  court  below,  "  unless  the  defendants  are  to 
be  precluded  altogether  from  giving  any  evidence  of  a  matter  con- 
fessedly issuable,  I  do  not  see  how  this  offer  could  be  rejected." 

The  cases  relied  upon  as  justifying  the  exclusion  of  the  evidence 
do  not  go  that  length.     In   Cunimings  v.  Morris  (25  N.  Y.  625),  it 

'  "  Every  action  must  be  prosecuted  in  the  name  of  the  real  party  in  interest." 
N.  Y.  Code  Civ.  Proc,  §  449.  —  Ed. 


I.]  TO    SUE   AND    RECEIVE    PAYMENT.  383 

was  held  that  the  maker  of  a  note  could  not  defeat  the  plaintiff,  not 
a  payee,  by  proof  that  the  consideration  of  the  transfer  to  him  was 
contingent  upon  his  collecting  the  note.  Such  plaintiff  was  declared 
to  be  the  real  party  in  interest  on  the  express  ground  that  the  trans- 
fer was  complete  and  irrevocably  vested  in  him  the  title  to  the  note. 

In  City  Bank  v.  Perkins  (29  N.  Y.  554),  there  was  no  question  of 
exclusion  of  evidence,  but  all  the  circumstances  being  proved,  it 
was  held  that  where  the  cashier  of  a  bank  holding  commercial  paper, 
pledged  it  "  duly  indorsed  "  to  the  plaintiff  as  security  for  a  loan  by 
the  plaintiff  to  his  bank,  and  it  had  been  actually  transmitted  under 
his  direction  to  the  plaintiff  so  indorsed,  it  was  no  defence  to  one 
admitting  his  liability  upon  such  paper  to  show  lack  of  authority  in 
the  cashier  alone  to  contract  a  loan  for  the  bank;  or  the  fraudulent 
diversion  by  him  of  the  funds  received  from  the  plaintiff  on  such 
loan.  Some  remarks  in  the  opinion  in  that  case,  not  necessary  to  the 
decision,  are  perhaps  too  broad  to  be  entirely  approved,  but  it  is 
fully  conceded  in  it  that  proof  that  the  plaintiff  had  no  right  what- 
ever to  the  possession  but  was  a  mere  finder  or  had  obtained  it  by 
some  "  positive  breach  of  law  "  would  be  a  defence. 

Brown  V.  Pe7ifield  {T)^  N.  Y.  473),  holds  merely  that  proof,  by  the 
party  liable  on  a  bill,  of  gross  inadequacy  of  the  consideration  for 
the  transfer  of  such  bill  to  the  plaintiff  does  not  impeach  the  validity 
of  such  transfer  as  to  the  party  so  liable. 

In  Allen  v.  Brown  (44  N.  Y.  228),  it  was  decided  that,  as  against 
the  plaintiff  holding  legal  title  to  the  claim  by  written  assignment 
valid  upon  its  face,  the  debtor  cannot  raise  the  question  as  to  the 
consideration  for  such  assignment  or  the  equities  between  the 
assignor  and  assignee. 

In  Eaton  v.  Alger  (47  N.  Y.  345),  the  note  being  payable  to  bearer 
and  produced  by  the  plaintiff  upon  the  trial,  it  was  proved  that  the 
payee  had  delivered  it  to  the  plaintiff  upon  his  undertaking  to  collect 
it  at  his  own  expense  and  pay  to  such  payee  upon  its  collection  a 
certain  sum  of  money.  This  was  held  to  show  sufficiently  that  the 
plaintiff,  and  not  the  payee,  was  the  real  party  in  interest  under  the 
Code. 

Sheridan  v.  The  Mayor  (G^  N.  Y.  30),  reiterates  the  doctrine  that, 
as  against  the  debtor,  the  plaintiff  holding  a  written  assignment  of 
the  claim  to  himself  valid  on  its  face,  obtained  the  legal  title  and 
was  the  real  party  in  interest  notwithstanding  the  fact  that  the  assign- 
ment was  without  consideration  and  merely  colorable  as  between  him 
and  the  original  claimant.  Such  assignment  is  expressly  declared 
to  protect  the  debtor  paying  the  assignee  against  a  subsequent  suit 
by  the  assignor. 


384  RIGHTS   OF   HOLDER.  [ART.  V. 

In  Gage\.  Kendall  {\^  Wend.  640),  the  fact  that  the  prosecution 
of  the  note  was  by  its  owner  and  holder  in  the  name  of  the  plaintiff,  a 
stranger  to  it, without  his  consent  or  knowledge,  was  sought  to  be 
set  up  as  a  defence,  but  it  was  ruled  out  on  the  ground  that  the 
nominal  plaintiff  need  have  no  title  to  or  interest  in  the  paper  sued 
upon.  We  apprehend  the  Code  has  changed  this  and  that  such  facts 
would  now  be  fatal  to  an  action.  Such  a  plaintiff  could  not  in  any 
view  be  the  real  party  in  interest.  Indeed,  he  would  not  ever  have 
manual  possession  of  the  paper. 

From  this  glance  at  the  cases,  it  appears  that  it  is  ordinarily  no 
defence  to  the  party  sued  upon  commercial  paper,  to  show  that  the 
transfer  under  which  the  plaintiff  holds  it  is  without  consideration 
or  subject  to  equities  between  him  and  his  assignor,  or  colorable  and 
merely  for  the  purpose  of  collection,  or  to  secure  a  debt  contracted 
by  an  agent  without  sufficient  authority.  It  is  sufficient  to  make  the 
plaintiff  the  real  party  in  interest,  if  he  have  the  legal  title  either  by 
written  transfer  or  delivery,  whatever  may  be  the  equities  between 
him  and  his  assignor."  But  to  be  entitled  to  sue,  he  must  now  have 
the  right  of  possession  and  ordinarily  be  the  legal  owner.  Such 
ownership  may  be  as  equitable  trustee,  it  may  have  been  acquired 
without  adequate  consideration,  but  must  be  sufficient  to  protect  the 
defendant  upon  a  recovery  against  him  from  a  subsequent  action  by 
the  assignor. 

As  we  understand  the  scope  of  the  offer  in  the  present  case,  it 
went  to  entirely  disprove  any  ownership  or  interest  whatever  or  even 
right  to  possession  as  owner  in  the  plaintiff.  It  should  therefore 
have  been  admitted.  It  may  be  true  that  the  plaintiff,  if  this  note 
had  been  delivered  to  him  with  the  intent  to  transfer  title,  might 
have  lawfully  overwritten  the  blank  indorsement  with  a  transfer  to 
himself;  it  is  also  true  that  the  production  of  the  paper  by  him  was 
prima  facie  evidence  that  it  had  been  delivered  to  him  by  the  payee 
and  that  he  had  title  to  it,  but  the  defendants'  offer  was  precisely  to 
rebut  this  very  presumption,  and  for  aught  that  we  can  know  the  evi- 
dence under  it  would  have  done  so. 

The  judgment  must  be  reversed,  and  a  new  trial  ordered,  costs  to 
abide  the  event. 

All  concur,  except  Miller  and  Earl,  JJ.,  absent. 

Judgment  reversed. 


'  A  transfer  merely  to  enable  the  transferee  to  sue  upon  the  instrument  is 
valid.  Law  v.  Parnell,  7  C.  B.  N.  S.  282;  Wheeler  v.  Johnso7i,  97  Mass.  39; 
Boyd  V.  Corbitt,  37  Mich.  52;  Beattie  v.  Lett,  28  Mo.  596;  Bankw.  Senior,  11  R. 
I.  376-    Walker  v.    Wait,  50  Vt.  66S.     If  acting  by  authority  of  the  beneficiary, 


^•]  TO    SUE   AND    RECEIVE   PAYMENT.  385 

§  90  DAVIS  V.   REILLY.  j-§  ^ji 

46  Weekly  Reporter  (Q.  B.  Div.)  96.  —  1897. 

Action  to  recover  the  price  of  goods.  Defendant  had  accepted 
a  bill  drawn  by  plaintiff  for  the  price  of  the  goods.  This  was  trans- 
ferred to  one  Bullock,  and  while  in  his  hands  was  dishonored  by 
defendant.  At  the  commencement  of  this  action  the  bill  was  still  in 
Bullock's  hands,  but  before  the  trial  it  was  delivered  up  to  plaintiff. 
The  trial  judge  gave  judgment  for  plaintiff,  on  condition  that  the 
bill  be  handed  over  to  defendant.     Defendant  appeals. 

Wright,  J.  —  There  are  no  merits  in  the  appellant's  case,  but  on 
the  point  of  law  I  feel  bound  to  agree  with  his  contention.  It  is 
settled  that  where  a  man  is  sued  upon  a  debt  it  is  a  good  defence 
to  say  that  he  has  given  a  bill  as  security  for  the  debt  and  that  that 
bill  is  outstanding  in  the  hands  of  a  third  party.  When  this  action 
was  brought  the  plaintiff  was  not  the  holder  of  the  bill,  and  he  can- 
not by  afterwards  getting  it  in  give  himself  a  cause  of  action  at  the 
date  when  he  commenced  his  proceedings.'  Now  that  the  bill  is  in 
his  hands  it  is,  of  course,  open  to  him  to  bring  a  new  action; '  but 
in  the  present  proceedings  I  think  he  must  fail.  We  must,  therefore, 
allow  the  appeal. 

Kennedy,  J.  —  I  agree. 

Appeal  allowed.' 


§90  CURTIS  z'.  SPRAGUE.  [§51] 

51  California,  239.  —  1S76. 
\^Reported  herein  at  p.  268,] 

such  transferee  is  the  real  party  in  interest.     The  authority  may  be  revoked. 
Coijistock  V.  Hoag,  5  Wend.  (N.  Y.)  600;  Best  v.  Nokomis  Bank,  76  111.  608.  —  Ed. 

'  Accord:   Small  v.  Jones,  8  Watts  (Pa.)  265;  Black  v.  Zacharie,  3  How.  (U    S  ) 
483.  —  Ed. 

^  Oliphant  v.  Church,  19  Pa.  St.  318;   Dickinson  v.  King,  28  Vt.  378.  —  En. 

'A  bill  or  note  given  by  a  debtor  to  his  creditor  for  a  precedent  debt  is  pre- 
sumptively only  conditional  payment.  2  Daniel  on  Neg.  Inst.,  §  1260  (citing 
exceptional  doctrine  in  Mass.,  Me.,  Vt.,  Ind.  and  La.).  Such  is  also  the  weight 
of  authority  in  case  of  the  giving  of  debtor's  bill  or  note  for  a  contemporaneous 
debt.  lb.,  §  1261.  There  is  a  strong  conflict  of  authority  as  to  the  presumption 
in  case  a  stranger's  bill  or  note  is  transferred  for  a  precedent  or  contemporane- 
ous debt.  lb.,  §§  1262-1265.  Whatever  the  presumption,  it  is  open  to  rebuttal 
by  showing  an  actual  agreement.  Ih.,  §  1267.  Laches  on  the  part  of  the  cred- 
itor in  exercising  diligence  to  charge  third  parties  upon  paper  transferred  as 
security  may  discharge  the  original  debt.  lb.,  %%  1276-1278.  —  Ed. 
negot.  instruments  —  25 


386  HOLDER  IN   DUE   COURSE :   REQUISITES.  [ART.  V. 

II.  Holder  in  due  course. 

I.  Requisites  to  Constitute  Holder  in  Due  Course. 

(a)  Instrument  must  be  co?nplete  and  regular. 

§  91  [52]  Davis  Sewing  Machine  Co.  v.  Best,  105  N.  Y.  59.  — 
1887.  Action  to  recover  the  value  of  certain  notes  diverted  by 
plaintiff's  president.  At  the  time  defendant  purchased  the  notes 
they  were  complete  and  regular  and  signed  by  the  plaintiff's 
treasurer,  except  that  they  were  not  signed  by  the  president 
although  a  blank  space  with  a  diagonally  ruled  line,  with  the  title 
of  his  office  printed  thereunder,  was  left  at  the  foot  of  each  instru- 
ment. 

Ruger,  Ch.  J.  —  It  is  not  seriously  questioned,  but  that  the 
notes  were  unlawfully  converted  by  W.,  and  that  the  plaintiff  was 
entitled  to  recover  their  possession,  unless  the  defendant  became 
the  bona  fide  holder  thereof,  by  virtue  of  their  purchase  from  the 
Security  Bank. 

The  authorities  seem  to  be  consistent  and  uniform  to  the  effect 
that  the  defendant  cannot  be  considered  such  a  holder. 

The  suggestion  that  a  party  issuing  negotiable  paper  with  blank 
spaces  therein,  apparently  intended  to  be  filled  up  to  make  a  com- 
plete contract,  impliedly  authorizes  its  holder  to  insert  appropriate 
words  in  such  blanks,  may  be  dismissed  as  inapplicable  to  such  a 
case  as  this. 

It  has  sometimes  been  held  that  a  party  signing  such  paper  and 
delivering  it  to  a  third  party  unfilled  by  implication  confers  such 
authority,  but  it  can  hardly  be  claimed  that  one  drawing  the  form  of 
a  promissory  note  which  is  unsigned,  and  falls  into  the  hands  of 
another,  thereby  authorizes  the  holder  to  attach  the  maker's  signa- 
ture or  to  add  anything  which  is  incomplete  in  its  execution. 

The  rule  that  a  party  buying  commercial  paper  which  remains  in 
some  essential  particular  incomplete  and  imperfect,  does  not  acquire 
the  character  of  a  bona  fide  holder,  rests  upon  sound  reasons  and 
is  well  established  in  commercial  law.  No  stronger  evidence  could 
be  afforded  that  such  paper  had  been  prematurely  put  in  circulation 
contrary  to  the  will  and  intention  of  its  maker,  than  the  fact  that  it 
had  not  been  fully  and  completely  prepared,  to  perform  the  office 
for  which  it  was  designed.  It  is  apparent  that  such  paper  must 
have  been  taken  from  the  possession  of  its  maker  before  an  intention 
to  part  with  it  had  been  fully  formed,  and  that  he  still  designed  to 
add  some  provision  or  formality  to  give  it  vitality  and  effect.  It  was 
said   by  the  late  Judge  Folger  in  Lcdwich  v.  McKim  (53  N.  Y,  307, 


II.   I.  I:.']  INSTRUMENT   NOT   OVERDUE.  387 

313),  that  "  a  negotiable  instrument  must  be  a  complete  ana  perfect 
instrument  when  it  is  issued,  or  there  must  be  authority  reposed  in 
some  one,  afterwards  to  supply  anything  needed  to  make  it  perfect." 
The  rule  is  also  laid  down  in  Daniel  on  Negotiable  Instruments 
(§§  841,  842). 

We  cannot,  therefore,  hold  that  the  Trust  Company  [defendant] 
became  the  bona  Jide  holder  of  the  seven  notes.     *     *     * 


(F)  Instrument  must  not  be  overdue,  etc 

§  91  O'CALLAGHAN  v.   SAWYER.  [§  52] 

5  Johnson  (N.  Y.)  118.  —  1809. 

Action  by  indorsee  against  maker.  Defendant  offered  to  prove  a 
set-off  for  goods  sold  the  payee  before  the  transfer  to  plaintiff.  The 
court  rejected  the  evidence  although,  at  the  time  of  the  transfer,  the 
note  was  overdue. 

Per  Curiam.  The  set-off  ought  to  have  been  received.  The  note 
had  long  been  due  and  dishonored,  when  it  was  indorsed;  and  the 
point  has  been  too  long  settled,  and  too  repeatedly  recognized,  to 
require  any  discussion  now,  that  the  indorsee  took  the  note,  subject 
to  all  the  equity,  and  to  every  defence  which  existed  against  it,  in 
the  hands  of  the  original  payee.  (2  Rev.  Stat.  354;  2  Caines,  372; 
I  Johns.  Rep.  319;  3  Term  Rep.  80.)     The  judgment  below  must 

be  reversed. 

Judgment  reversed. 


S  QI     CONTINENTAL  NATIONAL  BANK  v.  TOWNSEND. 

[§  52] 

87  New  York,  8.  —  1881. 

Action  by  indorsee  against  accommodation  maker.  Defendant 
offers  to  prove  off-set  against  payee-indorser.  On  the  last  day  of 
grace  the  note  was  indorsed  to  plaintiff  as  collateral  security  for  a 
pre-existing  debt.     Evidence  excluded.     Judgment  for  plaintiff. 

Finch,  J.  —  The  principal  question  on  this  appeal  has  been  decided 
in  this  court  adversely  to  the  views  of  the  appellant.  In  the  Grocers" 
Bank  v.  Penficld  (69  N.  Y.  502),  we  determined,  after  a  very  full 
examination  of  the  authorities,  that  where  a  promissory  note  is  made 
for  the  accommodation  of  the  payee,  but  without  restriction  as  to 
its  use,  an  indorsee  taking  it  as  collateral  security  for  an  antecedent 


388  HOLDER   IN   DUE    COURSE  :    REQUISITES.  [ART.  V. 

debt  of  the  indorser,  without  other  consideration,  but  in  good  faith 
and  before  dishonor,  occupies  the  position  of  a  holder  for  value  and 
is  protected  as  such.' 

That  doctrine  decides  this  case,  unless  there  be  something  in  the 
further  point  sought  to  be  raised  out  of  the  fact  that  the  note  was 
transferred  on  the  last  day  of  grace.  The  court  was  asked  to  find 
as  matter  of  fact  that  the  transfer  was  not  before  maturity,  and 
refused  so  to  find.  The  refusal  was  correct.  The  rule  must  be 
deemed  settled  in  this  state  that  the  maker  has  the  whole  of  the  last 
day  of  grace  within  which  to  pay,  and  that  any  earlier  action  against 
him  is  premature.  {Osborn  v.  Mo?icure,  3  Wend.  170;  Hopping  x. 
Quin,  12  Id.  517;  Cayuga  Co.  Bank  v.  Hunt,  2  Hill,  635;  Smith  v. 
Aylesitjorth,  40  Barb.  104;  Oothout\.  Ballard,  41  Id.  2,2i-^  While  a 
different  rule  prevails  elsewhere  to  some  extent  (Story  on  Prom, 
Notes,  278,  note  2;  Sargent  v.  Southgate,  5  Pick.  312;  Ayer  v. 
Hntchifis,  4  Mass.  370;  Finex.  Smith,  11  Gray,  38),  the  current  of 
authority  in  this  State  is  very  manifest,  and  we  can  see  no  just 
reason  for  doubting  it,  or  departing  from  it.  Although  this  note  was 
transferred  on  the  last  day  of  grace,  it  was  yet  transferred  before 
actual  dishonor,  and  so  as  to  bar  the  equities  sought  to  be  interposed. 

The  judgment  should  be  affirmed,  with  costs. 

All  concur.     Judgment  affirmed. 


§  91  CHESTER  V.  DORR.  [§  52] 

41  New  York,  279.  —  1S69. 

Action  against  indorser,  of  eight  notes,  each  in  the  following 
form: — 

NoRTHFIELD  Jamcary  15th,  iSsS. 
$500.00 

Eight  months  after  date,  we  promise  to  pay  to  the  order  of  James  A.  Dorr, 
five  hundred  dollars,  at  No.  34  Pine  street,  New  York  City. 

The  Northfield  Brick  Company, 

By  James  A.  Dorr,   Treasurer. 
[Indorsed]:   Protest  waived, 
James  A.  Dorr. 

Dorr  indorsed  the  notes  solely  for  the  accommodation  of  one 
Myers,  a  creditor  of  the  brick  company,  and  without  consideration. 
Some  two  or  three  years  after  the  maturity  and  dishonor  of  the  notes 
Myers  transferred  them  to  plamtiff. 


'  See  Neg.  Inst.  L.,  §  55  [29].  —  Ed. 


II.   I.  <^.]  INSTRUMENT   NOT   OVERDUE.  389 

Woodruff,  J.  —Mr.  Justice  Story,  in  his  treatise  on  Promissory 
Notes  (section  178),  thus  states  the  difference  between  the  legal 
effect  of  the  transfer  of  a  promissory  note,  before  and  after  maturity: 

"  If  the  transfer  is  made  before  the  maturity  of  the  note,  to  a 
bona  fide  holder,  for  a  valuable  consideration,  he  will  take  it  free  of 
all  equities  between  the  antecedent  parties,  of  which  he  has  no 
notice. 

If  the  transfer  is  after  the  maturity  of  the  note,  the  holder  takes 
it  as  a  dishonored  note,  and  is  affected  by  all  the  equities  between 
the  original  parties,  whether  he  has  any  notice  thereof  or  not.  But, 
it  is  not  to  be  understood  by  this  expression,  that  all  sorts 
of  equities  existing  between  the  parties,  from  other  independent 
transactions  between  them,  are  intended;  but  only  such  equities  as 
attach  to  the  particular  note,  and  as  between  those  parties,  would 
be  available  to  control,  qualify  or  extmguish  any  rights  arising 
thereon." 

The  learned  author  gives  this  as  the  final  conclusion,  from  the 
numerous  cases  cited  by  him,  an  examination  of  which  shows,  that 
it  is  onl)'^  after  some  difference  of  opinion  that  it  has  come  to  be 
deemed  settled.  Or,  as  Mr.  Chitty  says,  of  the  opinion  of  Buller 
and  Ashhurst,  JJ.,  in  Broiun  v.  Davis  (3  T.  R.  80),  expressed,  when 
Lord  Kenyon  doubted  its  broad  extent,  "  this  latter  opinion  is  now 
the  law."     That  opinion  was  to  the  effect: 

"  That  where  a  note  is  overdue,  that  alone  is  such  a  suspicious 
circumstance,  as  makes  it  incumbent  on  the  party  receiving  it,  to 
satisfy  himself  that  it  is  a  good  one,  otherwise  much  mischief  might 
arise."  "If  a  note  indorsed,  be  not  due  at  the  time,  it  carries  no 
suspicion  whatever  on  the  face  of  it,  and  the  party  receives  it  on  its 
own  intrinsic  credit.  But  if  it  is  overdue,  though  I  do  not  say  that, 
by  law,  it  is  not  negotiable,  yet,  certainly  it  is  out  of  the  common 
course  of  dealing,  and  does  give  rise  to  suspicion.  .  .  .  Gen- 
erally, when  a  note  is  due,  the  party  receiving  it,  takes  it  on  the 
credit  of  the  person  who  gives  it  to  him." 

The  foundation  of  the  rule,  which  distinguishes  commercial  paper 
from  ordinary  common-law  choses  in  action,  is  in  harmony  with  the 
law  thus  stated;  the  holder  of  the  former  is  protected  against  any 
inquiry  into  its  previous  history,  and  is  warranted  in  giving  it  full 
faith,  according  to  its  tenor,  because  commercial  convenience  and 
the  importance  of  the  free  and  unembarrassed  use  of  commercial 
credits  required  it;  and  on  this,  the  mercantile  customs,  which 
ripened  into  the  law  merchant,  were  founded.  These  reasons,  how- 
ever, could  have  no  application  to  paper  which  had  been  dishonored. 
The  credit  it  was  adopted  to  invite  is  spent,  and  the  very  fact  of 
dishonor  is  inconsistent  with  the  purposes  which  the  rule  was 
intended  to  subserve. 

The  rule  is  simple  and  convenient  of  application,  is  in  no  sense 


390  HOLDER   IN   DUE   COURSE:   REQUISITES.         [ART.  V. 

inconsistent  with  the  usefulness  of  negotiable  paper  for  the  purposes 
for  which  it  is  intended,  and,  as  it  seems  to  me,  is  a  just  security 
against  mischief  and  fraud. 

In  the  terms  in  which  it  is  above  stated  it  includes  the  defence 
of  want  of  consideration,  whenever  that  renders  the  note  invalid  in 
the  hands  of  him  who  holds  it,  when  it  becomes  due.  Such  want  of 
consideration  is  an  inherent  defect  in  the  contract  itself.  Or,  in  the 
language  of  the  rule,  attaches  to  the  note  itself,  in  the  hands  of  one 
for  whose  accommodation  a  note  is  made,  and  does  not,  like  a  set- 
off or  other  collateral  matter  apart  from  the  note,  arise  out  of  an 
independent  transaction. 

But  the  same  learned  writer,  above  referred  to,  states  that  the 
mere  fact  that  an  accommodation  note  has  been  indorsed  after  it 
became  due,  does  not  of  itself,  without  some  other  equity  in  the 
maker,  defeat  a  recovery  by  the  mdorsee.  (Story,  §  194.)  And 
Mr.  Chitty  states  that  it  has  been  so  decided.  The  cases  of  Char/es 
V.  Marsden  (i  Taunt.  224);  Sturtevant  v.  Ford  {j\  Man.  &  Gr.  loi); 
4  Scott,  608,  and  Caruthers  v.  West  {\\  Q.  B.  143),  are  in  support  of 
the  proposition. 

These  are  the  cases  upon  the  authority  of  which  the  present  case 
was  decided  below. 

I  am  constrained  to  say  that  I  am  not  satisfied  that  such  an 
exception  to  the  rule  is  either  just  or  called  for  by  any  principle; 
nor  am  I  at  all  convinced  by  the  reasons  assigned  for  the  exception. 

That  the  maker  or  indorser  of  a  note  for  the  accommodation  of 
another  should  be  held  to  the  terms  of  his  own  indorsement  accord- 
ing to  their  just  interpretation,  I  fully  agree.  That  one  who 
receives  such  paper  before  maturity,  should  not  be  affected  by  the 
mere  fact  that  it  was  made  or  indorsed  without  consideration,  I 
equally  agree.  That  when  a  party  lends  his  note  or  indorsement  to 
another  without  restriction  as  to  its  use,  he  authorized  the  negotia- 
tion thereof  in  any  manner  which  may  serve  the  convenience  or 
credit  of  the  borrower,  may  be  conceded. 

From  this  latter  concession  it  is  argued,  that  such  a  lending  of  one's 
name  is  furnishing  a  continuing  guarantee  of  the  payment  of  the 
note,  irrespective  of  its  terms  as  to  time  of  payment,  and  is  therefore 
binding  whenever  it  is  transferred,  and  however  long  after  it  has 
become  payable  and  been  dishonored.  That  the  absence  of  express 
restriction  warrants  the  inference,  that  the  making  or  indorsement 
was  to  enable  the  borrower  to  use  it  whenever  thereafter  it  suited 
his  pleasure,  and  so  "  enforcing  its  payment  is  in  accordance  with 
the  object  for  which  the  note  was,  as  matter  of  accommodation, 
made  or  indorsed;  "  and  in  the  discussion  in  England,  it  has  been 


II.   I.  '^.]  INSTRUMENT   NOT   OVERDUE. 


391 


suggested,  that  supposing  an  accommodation  acceptance  to  remain 
in  the  hands  of  the  party  accommodated,  it  may  be  treated  as  giving 
authority  by  implication  to  use  it  thereafter,  as  his  convenience  or 
needs  may  require. 

In  respect  to  the  last  suggestion,  two  observations  are  pertinent; 
first,  it  begs  the  question,  for  assuming  the  rule  to  be  that  he  who 
receives  the  note  or  bill,  after  dishonor,  acquires  no  better  title  to 
recover  thereon  than  he  has  from  whom  it  was  received,  then  there 
is  no  reason  why  the  accommodation  maker  or  indorser  should  not 
treat  the  note  in  the  hands  of  the  borrower,  after  maturity,  as 
functus  officio,  and  mere  waste  paper.  And,  second,  how  is  the 
maker  or  indorser,  in  such  case,  to  withdraw  his  note  or  indorse- 
ment? Is  he  to  be  driven  into  a  court  of  equity,  and  to  praying  out 
an  injunction,  to  prevent  a  subsequent  transfer?  I  think  not.  Take 
the  present  case;  the  note  itself  was  the  property  of  the  holder  at 
its  maturity  (Myers),  and  was  a  valid  note,  in  his  favor  against  the 
maker.  The  indorsement  of  the  defendant  (the  appellant's  testator) 
was  material  as  a  transfer  of  title,  although,  being  made  for  Myers* 
accommodation,  it  could  not  be  enforced  against  such  defendant  as 
indorser.  I  cannot  agree  that  it  was  incumbent  on  the  defendant 
to  go  into  a  court  of  chancery  to  compel  Myers  to  suffer  a  writing 
of  the  words,  "  without  recourse,"  or  an  equivalent  expression,  as 
a  qualification  of  such  indorsement. 

As  to  the  other  reason,  it  is  even  less  satisfactory,  because  it  pro- 
ceeds, I  think,  upon  an  entire  misconstruction  of  the  act  of  making 
or  indorsing  a  note  for  the  accommodation  of  another.  Its  purpose 
and  object,  is  to  obtain  credit  for  such  other,  or  to  enable  him  to  do 
so.  The  very  terms  of  the  note  declare  the  credit  it  is  intended  to 
procure,  that  is  to  say,  until  the  maturity  of  the  note.  Within  that 
range,  the  making  or  indorsement  being  unrestricted  as  to  its  use, 
the  borrower  may  use  it  as  his  exigencies  require,  and  a  transferee 
may  receive  it  in  reliance  upon  the  undertaking  which  is  imported 
by  its  terms. 

But  the  very  term  of  payment,  contained  in  the  note,  imports  that 
the  accommodation  party  undertakes  that  the  note  shall  be  paid  at 
its  maturity;  and  that  he  who  then  holds  the  note,  shall  have  recourse 
to  him,  if  it  be  not  then  paid.  Where  the  accommodation  (as  in  the 
present  case)  is  by  indorsement,  that  is  the  precise  contract,  viz., 
that  the  note  shall  be  paid  at  maturity,  and  not  that  it  shall  be  paid 
at  diXY^  future  time.  If  the  note  be  not  paid  at  maturity,  the  contract 
is  broken,  and  if  he  who  then  holds  it  can  recover  thereon,  then 
his  right  of  recovery  may  be  transferred  to  another;  and  the 
recovery  of    the   latter  will    be,    not  because   the  accommodation 


392  HOLDER   IN   DUE   COURSE  :    REQUISITES.  [ART.  V. 

indorser  undertook  that  the  note  should  be  paid  to  him,  or  should 
be  paid  at  some  date  after  it  was  due,  but  because  a  valid  cause  of 
action,  existing  in  favor  of  the  holder  at  maturity,  has  been  trans- 
ferred to  him. 

It  is  not  according  to  the  intent  or  meaning  of  an  indorsement  for 
another's  accommodation,  to  say  that  the  indorser  intends  to  give 
the  use  of  his  credit  for  any  other  period  than  that  limited  in  the 
note;  or  that  such  an  indorsement  imports  authority  to  use  it, 
when  that  period  has  elapsed. 

One  may  be  willing  by  indorsement,  to  guarantee  the  solvency  of 
another  for  sixty  days,  or  for  six  months,  and  yet  he  would  wholly 
refuse  to  do  so  for  a  period  of  two  years.  And  accordingly,  when 
such  accommodation  is  given,  it  is  a  most  material  circumstance  that 
the  time  during  which  the  borrower  is  at  liberty  to  obtain  credit  on 
the  note,  is  fixed  by  the  limitation  of  the  time  of  payment  therein. 

I  deem  the  just  view  of  the  subject  to  be,  that  when  a  note  has 
become  due  and  is  dishonored,  the  rights  and  responsibilities  of  the 
parties  thereto  are  fixed.  The  note  then  loses  the  chief  attribute 
of  commercial  paper.  It  is  no  longer  adapted  to  the  uses  and  pur- 
poses for  which  such  paper  is  made,  and  in  respect  of  which  it  is 
important  that  it  should  circulate  freely.  And  thereafter,  he  who 
takes  it,  takes  it  with  knowledge  of  its  dishonor,  with  obvious 
reason  to  believe  that  there  exists  some  reason  why  it  was  not  paid 
to  the  holder;  and  takes  it  with  just  such  right  to  enforce  it  as 
such  holder  himself  has,  and  no  other. 

In  thus  stating  my  views,  I  am  not  insensible  of  the  apparent 
authority  for  the  decision  made  below,  but  I  am  also  aware  that  the 
judges  in  England  have  not  been  at  all  agreed  upon  the  subject,  and 
have  expressed  doubt  of  the  correctness  of  the  decision  in  Charles 
V.  Marsden,  upon  which  the  other  two  cases  above  referred  to  were 
decided.  The  cases,  largely  collected  in  the  notes  to  Chitty  in  the 
recent  edition,  warrant,  I  think,  the  dissatisfaction  I  have  expressed. 
No  case  in  this  State  has  called  for  a  decision  of  the  question;  and 
yet  in  Broivn  v.  Mott  (7  J.  R.  361),  and  in  Grant  v.  ElUcott  (7  Wend. 
227),  the  case  of  Charles  v.  Marsden  is  referred  to  without  disappro- 
bation, and  the  proposition  to  be  derived  therefrom  is  stated;  but  in 
neither  case  was  the  point  now  raised  before  the  court,  for  in  neither 
did  it  appear,  that  the  plaintiff  took  the  note  after  it  became  due. 

And  that  in  other  States  in  this  country,  such  an  exception  to  the 
general  rule  first  above  stated  is  repudiated,  see  Brotvji  v.  Hastin^rs 
(36  Penn.  285);  Britton  v.  Bishop  (11  Vt.  70);  Odiorne  v.  Howard 
(10  N.  H.  343);  Cuinmiugs  v.  Little  (45  Maine,  183);  Vinton  v.  King 
(86  Mass.  4  Allen,  563);  Kellogg  v.  Barton  (94  Mass.  12  Allen,  527). 


II.  I.  /'.]  INSTRUMENT   NOT   OVERDUE.  393 

And  the  general  proposition,  that  he  who  takes  a  note  when  over- 
due, takes  it  subject  to  all  defences  inherent  in  the  note,  or  arising 
out  of  any  agreement  with  the  holder,  expressed  or  implied,  and 
relating  thereto,  or  in  another  form,  that  such  an  indorsee  obtains 
no  greater  or  other  rights  than  his  indorser  had  in  it  at  the  time  of 
the  indorsement,  has  been  stated  as  law  in  cases  almost  without 
number.  It  will,  perhaps,  suffice  to  refer  to  two  from  the  Supreme 
Court  of  the  United  States.  Andrews  v.  Fond  {i;^  Pet.  79),  says  of 
the  indorsee  of  a  dishonored  bill:  "  If  he  chooses  to  receive  it,  he 
takes  it  with  all  the  infirmities  belonging  to  it;  and  is  in  no  better 
condition  than  the  person  from  whom  he  received  it."  {Fowler  v. 
Brantley,  14  Pet.  321.)  "A  note  overdue  or  bill  dishonored  is  a 
circumstance  of  suspicion  to  put  those  dealing  for  it  afterward  on 
their  guard,  and  in  whose  hands  it  is  open  to  the  same  defences  it 
was  in  the  hands  of  the  holder  when  it  fell  due.  After  maturity, 
such  paper  cannot  be  negotiable  'in  the  due  course  of  trade,' 
although  still  assignable."     See  3.\so  Foley  v.  Smith  (6  Wallace,  492.) 

In  my  own  opinion,  the  just  rule,  and  the  rule  resting  on  the 
soundest  principle,  requires  us  to  reverse.  The  supposed  exception 
to  the  general  rule  rests  on  neither  reason,  nor  as  I  think  on 
authority,  certainly  not  in  this  country. 

It  was  suggested  by  the  counsel  for  the  respondent,  that  as  matter 
of  fact,  the  defendant's  indorsement  was  not  without  consideration, 
and  for  the  accommodation  of  Myers,  who  held  the  note  at  maturity. 

The  finding  of  the  referee  on  that  subject  is  conclusive  in  this 
court;  and  that  finding  is,  that  the  indorsement  was  made  with- 
out consideration  at  Myers'  request,  and  to  enable  Myers  to  use 
the  notes.  This  is  but  a  statement  that  the  defendant  indorsed  the 
notes  for  the  accommodation  of  Myers.  It  was  so  treated  in  the 
court  below,  and  it  is  an  unwarranted  assumption  to  say,  that  pos- 
sibly the  defendant  had  some  other  inducement  to  indorse  the  notes, 
in  order  that  the  plaintiff  might  accept  the  notes,  and  give  credit  to 
the  maker  thereof,  who  was  his  debtor. 

Murray,  J.,  also  read  an  opinion  for  reversal. 

Grover,  Lott,  James  and  Daniels,  JJ.,  concurred  for  reversal. 

Mason,  J.,  thought  the  law  settled  in  this  State  in  favor  of  the 
plaintiff,  by  the  cases  (7  Johns.  361;  7  Wend.  227;  and  i  Hill,  513), 
and  was  for  affirmance. 

Hunt,  Ch.  J.,  was  also  for  affirmance.  He  did  not  approve  of 
construing  the  defendants'   contract  as  conditioned  upon    transfer 

before  due. 

Judgment,  n- versed.' 


Accord:  Battle  v.   Weems,  44  Ala.  105  (but  cf.  Conner ly  v  Flanters\  etc.^  Ittsur. 


394  HOLDER   IN   DUE   COURSE :    REQUISITES.         [ART.  V. 

§  91  KELLEY  V.  WHITNEY.  [§  52] 

45  Wisconsin,  iio.  —  1878. 

Action  to  foreclose  a  mortgage.  Defence,  payment  to  plaintiff's 
assignor.  When  plaintiff  purchased  the  note  and  mortgage  the  note 
was  not  yet  due,  but  instalments  of  interest  were  overdue  and 
unpaid.      Judgment  for  defendants.     Plaintiff  appeals. 

Cole,  J.  — Can  the  plaintiff,  under  the  circumstances,  claim  the 
protection  which  the  law  affords  a  bona  fide  purchaser  of  commercial 
paper  for  value,  before  maturity?  The  learned  circuit  court,  in 
obedience  to  the  decision  of  this  court  in  Hart  v.  Stickncy  (41  Wis. 
630),  decided  that  the  plaintiff  took  the  note  and  mortgage  as  dis- 
honored and  subject  to  equities,  because  instalments  of  interest  were 
due  and  unpaid  when  they  were  transferred.  If  there  is  error  in  this 
ruling  of  the  court  below  —  as  we  are  well  satisfied  there  is,  —  it  is 
an  error  for  which  this  court,  and  not  the  circuit  court,  should  be 
held  responsible.  When  the  case  of  Hart  v.  Stickney  was  decided, 
our  attention  was  not  called  by  counsel,  and  we  entirely  overlooked 
in  our  examination,  the  previous  case  of  Boss  v.  Hewitt,  in  the  15 
Wis.  260,  where  a  directly  opposite  ruling  was  made.  The  case  of 
Boss  v.  Hezvitt  was  decided  in  1862,  and  the  point  was  directly 
involved  in  the  judgment.  The  defendant  had  given  four  negotiable 
notes  payable  respectively  in  one,  two,  three,  and  four  years,  with 
interest  payable  annually,  for  the  price  of  sheep  bought  of  the 
payees,  and  secured  all  the  notes  by  a  mortgage.  One  of  the  notes, 
and  an  instalment  of  interest  on  all  of  them,  being  due  and  unpaid, 
the  payees  transferred  the  notes  and  mortgage  to  the  plaintiff,  who 
brought  an  action  to  foreclose  the  mortgage.  The  defendant 
pleaded  fraud  on  the  part  of  the  payees  in  the  sale  of  the  sheep.  The 
court  held  that  the  fact  that  the  first  note  was  due  and  unpaid  at  the 
time  of  the  transfer  to  the  plaintiff,  did  not  let  in  the  defence  as 
against  the  notes  not  then  due.  On  the  other  point,  Mr.  Justice 
Paine,  in  delivering  the  opinion  of  the  court,  says:  ''  Neither  do 
we  think  that  the  fact  that  the  interest  had  not  been  paid  makes  the 
case  equivalent  to  a  purchase  after  maturity,  so  as  to  let  in  defences 
that  might  have  been  made  against  the  original  parties.  The  inter- 
est is  a  mere  incident  to  the  debt,  and  although  it  is  frequently  pro- 
vided that  it  shall  be  paid  at  stated  periods  before  the  principal  falls 
due,  we  know  of  no  authorities  holding  that  a  failure  to  pay  it  dis- 

ance  Company,  66  Ala.  432);  Bacon  v.  Harris,  15  R.  I.  599;  Cottrell  v.  IVatkins, 
89  Va.  Box;  cases  cited  in  principal  case.  But  see  Miller  v.  Lamed,  103  III.  562; 
Seyfert  v.  Edison,  45  N.  J.  L.  393;    Salem  Bank  v.  Grant,  71  Me.  374.  —  Ed. 


II.  I.  /'.]  INSTRUMENT   NOT   OVERDUE.  395 

honors  the  note,  so  as  to  let  in  all  defences  against  subsequent  pur- 
chasers for  value  without  any  other  notice  of  defects  except  the  mere 
fact  that  such  interest  has  not  been  paid.     And  we  do  not  think  it 
should  have  that  effect.     The  maturity  of  the  note,  within  the  mean- 
in'^'^  of  the  commercial  rule  upon  this  subject,  is  the  time  when  the 
principal  becomes  due,"  pp.   262-3.     Boss  v.  Hewitt  derives  direct 
support  from  the  decisions  in  National  Bank  of  North  America  v. 
Kir  by  (108  Mass.  497),  and  Cromwell  v.  County  of  Sac  (96  U.  S.  51). 
It  is  true,  in  National  Bank  v.  Kirby,  while  it  was  held  that  failure  to 
pav  interest,  standing  alone,  was  not  sufficient  in  law  to  throw  such 
discredit  upon  the  principal  security  upon  which  it  is  due,  as  to  sub- 
ject the  holder  to  the  full  extent  of  the  security,  to  antecedent  equi- 
ties, yet  it  was  also  held  that  it  was  a  fact  proper  to  be  considered 
bv  the  jury,  in  connection  with  other  circumstances,  on  the  question 
whether  the  holder  is  entitled  to  the   protection  of  one  who   has 
taken  it  in  good  faith  and  without  actual  or  constructive  notice  of 
existing  defences.     What  is  said  in  the  opinion  in  Hart  v.  Stickney 
upon  the  point  now  in  question  was  not  necessarily  involved  in  the 
decision,  and   must  therefore  be  regarded  as  a  mere  dictum.     The 
judgment  in  that  case  was   reversed  on  the  appeal  of  the  plaintiff, 
the   holder  of  the  note,  on  the  ground  that  the  trial  court  refused 
proper,    and   gave    erroneous,    instructions    as    to    the  legal  conse- 
quences resulting  where  a  vendee  abandons  possession  of  premises 
held  by  him  under  an  executory  contract  of  sale,  and  the  vendor 
takes  the  possession.     That  was  the  precise  point   upon  which  the 
judgment  was  reversed.     And  as  the  earlier  case  of  Boss  x.  Hezcitt 
was  entirely  overlooked,  which,  by  implication,  is  sustained  by  many 
decisions  of  this  court,  made  in  the  farm   mortgage   cases   and  in 
actions  arising  upon  town,  county  and  city  bonds,  we  deem  it  our 
duty  to  adhere  to  the  rule,  that  a  purchaser  for  value  of  unmatured 
commercial  paper,   with    interest  overdue,   is  not,    from    that   fact 
alone,  affected  with  notice  of  prior  equities  or  infirmities  in  the  title. 

[The  court  then  holds  that  the  plaintiff  was  a  bona  fide  holder  \ 
the  indorsement  "  without  recourse,"  is  not  enough  to  charge  a  pur- 
chaser with  notice  of  a  defence  or  to  put  him  on  inquiry;  nor  were 
the  other  facts  alleged  enough  for  that  purpose.] 

By  the  Court.  —  The  judgment  of  the  circuit  court  is  reversed,  and 
the  cause  remanded  with  directions  to  enter  such  a  judgment  [for 
plaintiff]. 


396  HOLDER   IN    DUE    COURSE  :    REQUISITES.  [ART.  V. 

§  92  LOSEE  V.   DUNKIN.  [§  53] 

7  Johnson  (N.  Y.)  70.  —  1810. 

In  error,  from  the  Court  of  Common  Pleas  of  Dutchess  county. 

The  suit  below  was  an  action  of  assumpsit  on  a  promissory  note 
given  by  the  defendant  to  David  Newton,  payable  on  demand,  to 
Newton  or  bearer,  for  the  sum  of  55  dollars,  with  interest,  and 
dated  the  i6th  day  of  January,  1805.  An  assignment  in  writing 
from  Newton  to  the  plaintiff,  dated  April  3,  1805,  was  indorsed  on 
the  note.  The  declaration  was  in  the  usual  form,  on  the  note. 
Plea,  ?ion  assmnpsit. 

The  defendant  proved,  that  shortly  after  the  date  of  the  assign- 
ment, he  paid  Newton  50  dollars,  which  he  agreed  to  credit  on  the 
note. 

The  plaintiff's  counsel  contended,  that  this  evidence  was  inadmis- 
sible, on  the  issue  of  non  assumpsit;  but  the  court  ruled,  that  it 
should  be  admitted;  and  the  jury  found  a  verdict  for  the  plaintiff 
for  six  dollars  and  seventy-five  cents;  and  judgment  was  given  for 
the  plaintiff  for  that  sum,  and  for  the  defendant,  for  the  costs. 

Per  Curiam.  —  The  note  was  payable  on  demand,  and  negotiated 
upwards  of  two  months  and  a  half  after  it  was  given.  The  first 
question  that  naturally  arises  is,  wheth.er  this  is  to  be  considered  as 
a  note  negotiated  after  it  was  due,  so  as  to  let  m  the  defence.  There 
is  no  precise  time  at  which  such  a  note  is  to  be  deemed  dishonored. 
In  Fiirman  v.  Haskin  (2  Caines,  369),  a  note  payable  on  demand,  and 
negotiated  eighteen  months  after  it  was  given,  was  considered  as  a 
note  out  of  time,  so  as  to  subject  the  indorsee  to  the  matter  of 
defence  existing  when  it  was  indorsed.  On  the  other  hand,  in  Hen- 
dricks V.  Jiidah  (i  Johns.  Rep.  319),  the  note  was  payable  on  demand, 
and  drawn  in  England,  and  was  put  in  suit  in  this  State  by  the 
indorsee  within  a  year  from  its  date,  and  the  court  said  that  the 
maker  was  not  entitled,  in  that  case,  to  a  set-off  of  demands  against 
the  payee,  without  proof  of  a  fraudulent  assignment,  for  it  was  to 
be  presumed  that  the  note  was  assigned  soon  after  its  date.  The 
demand  must  be  in  reasonable  time,  and  that  will  depend  upon  the 
circumstances  of  the  case,  and  the  situation  of  the  parties.  There 
are  no  particulars  peculiar  to  this  case  disclosed;  and  the  court  can- 
not say  that  it  was  erroneous  to  let  in  the  defence,  for  the  circum- 
stances of  this  case  might  have  been  such  as  to  justify  the  conclusion 
that  the  note  was  dishonored  when  it  was  assigned. 

Assuming  this  to  have  been  the  case,  there  is  no  doubt  but  that 
the  defendant  might  give  in  evidence,  under  the  general  issue,  pay- 
ment  to   the   original   payee    before    the    indorsement.     {Brown  v. 


II.  I-  ^.]  GOOD    FAITH    AND   VALUE.  397 

Davis,  3  Term  Rep.  So;  Brown  v.  Cornish,  i  Ld.  Raym.  217.)  If 
the  payment  was  in  full  discharge  of  the  note,  it  would  go  in  bar  of 
the  suit;  and  if  it  was  not  a  payment  in  full,  it  will  go  only  in 
mitigation  of  damages. 

The  judgment  below  must,  therefore,  be  affirmed. 

Judgment  affirmed.' 


(r)  Must  be  taken  in  good  faith  a7id  for  value. 

§  91  De  WITT  V.   PERKINS.  [§  52J 

22  Wisconsin,  473.  —  1868. 

Action  on  defendant's  promissory  note.  The  jury,  by  direction 
of  the  court,  found  for  the  plaintiff;  and  the  defendant  appealed 
from  the  judgment.  The  questions  in  dispute  will  sufficiently  appear 
from  the  opinion. 

Dixon,  C.  J.  — The  plaintiff,  knowing  the  defendant,  and  that  he 
was  in  fair  credit  and  able  to  respond,  purchased,  shortly  before  its 
maturity,  a  promissory  note  against  him  for  three  hundred  dollars 
and  interest  for  six  months,  paying  therefor  only  the  sum  of  five 
dollars.  As  between  the  defendant  and  the  payee,  the  note  was 
invalid  for  want  of  consideration.  Is  the  plaintiff  a  bona  fide  holder 
for  value,  so  as  to  protect  him  against  the  defence  of  a  want  of  con- 
sideration? We  answer,  no.  The  consideration  paid  by  him  was 
merely  nominal.  It  is  as  if  the  note  had  been  given  to  him,  and  he 
should  claim  the  protection  afforded  a  bona  fide  holder  for  value.  It 
appears  on  the  face  of  the  transaction  that  it  was  not  a  negotiation 
of  the  note  in  the  usual  course  of  business,  but  that  the  sum  exacted 
on  the  one  side  and  paid  on  the  other  was  to  give  that  the  semblance 
of  a  sale,  which  otherwise  was  intended  as  a  mere  gift,  or,  what  is 
worse,  a  shift  to  get  the  note  out  of  the  hands  of  the  payee  so  as  to 
cut  off  the  defence  of  the  maker,  for  the  payee's  benefit.  Either 
view  is  equally  fatal  to  the  action  of  the  plaintiff,  provided  the 
defence  of  a  want  of  consideration  is  established. 


'  "  On  this  question  the  authorities  are  not  uniform,  but  no  case  shows  that 
more  than  three  months  can  reasonably  be  overlooked.  Business  paper  would 
usually  be  adjusted  within  that  time,  if  regular."  Paine  v.  Central  Vt.  A'.,  14 
Fed.  Rep.  269,  271.  See  the  whole  matter  as  between  holder  and  maker  and 
between  holder  and  indorser  (tost,  §  131  [71] ),  and  as  to  demand  notes  payable 
with  interest  and  like  notes  payable  without  interest,  discussed  in  Hcrruk  v. 
Woolverton.  41  N.  Y.  581.  —  Ed. 


398  HOLDER   IN    DUE   COURSE  :    REQUISITES.  [ART.  V. 

Again,  the  buying  of  a  note  against  a  solvent  maker,  the  purchaser 
knowing  him  to  be  such,  for  a  mere  nominal  consideration,  is  very 
strong,  if  not  conclusive,  evidence  of  mala  fides.  It  is  constructive 
notice  of  the  invalidity  of  the  note  in  the  hands  of  the  seller  —  such 
as  to  put  the  purchaser  upon  inquiry,  which  if  he  fails  to  make,  he 
acts  at  his  peril.  {Brown  v.  Taber,  5  Wend.  566;  Matheivs  v.  Poy- 
thress,  4  Ga.  287,  299  et  seq.,  and  cases  cited;  Anderson  v.  Nicholas, 
28  N.  Y.  600;  Whitbread  v.  Jordan,  i  Younge  &  CoUyer  [Exch.J, 
303,  328;  Jones  V.  Smith,  i  Hare,  68;  i  Parsons  on  Notes  and  Bills, 
254,  259-60.)  The  proof  offered  to  show  a  failure  of  consideration 
should  have  been  received,  and  the  case  submitted  to  the  jury  on 
this  ground. 

[Omitting  a  question  of  evidence.] 

By  the  Court.  —  Judgment  reversed,  and  a  new  trial  awarded.' 


§  91  Lord  Blackburn  in  JONES  zk  GORDON.  [§  52] 

L.  R.     2  Appeal  Cases,  616.  —  1877. 

Farther,  my  Lords,  I  think  it  is  right  to  say  that  I  consider  it  to 
be  fully  and  thoroughly  established  that  if  value  be  given  for  a  bill 
of  exchange,  it  is  not  enough  to  show  that  there  was  carelessness, 
negligence,  or  foolishness  in  not  suspecting  that  the  bill  was  wrong, 
when  there  were  circumstances  which  might  have  led  a  man  to  sus- 
pect that.  All  these  are  matters  which  tend  to  show  that  there  was 
dishonesty  in  not  doing  it,  but  they  do  not  in  themselves  make  a 
defence  to  an  action  upon  a  bill  of  exchange.  I  take  it  that  in  order 
to  make  such  a  defence,  whether  in  the  case  of  a  party  who  is  solvent 
and  sui  juris,  or  when  it  is  sought  to  be  proved  against  the  estate  of  a 
bankrupt,  it  is  necessary  to  show  that  the  person  who  gave  value 
for  the  bill,  whether  the  value  given  be  great  or  small,  was  affected 
with  notice  that  there  was  something  wrong  about  it  when  he  took 
it.  I  do  not  think  it  is  necessary  that  he  should  have  notice  of  what 
the  particular  wrong  was.  If  a  man,  knowing  that  a  bill  was  in  the 
hands  of  a  person  who  had  no  right  to  it,  should  happen  to  think 
that  perhaps  the  man  had  stolen  it,  when  if  he  had  known  the  real 
truth  he  would  have  found,  not  that  the  man  had  stolen  it,  but  that 
he  had  obtained  it  by  false  pretences,  I  think  that  would  not  make 
any  difference  if  he  knew  there  was  something  wrong  about  it  and 
took  it.      If  he  takes  it  in  that  way  he  takes  it  at  his  peril. 

1  Accord:    Smith  v.Jansen.  12  Neb.  125  ($100  for  $30);  Hunt  v.  SunJ/orJ.  6  Yerg. 
(Tenn.)  387  ($333.33  for  $125);    Gouldv.  Steveus,  43  Vl  125  ($300  for  $50).  —  En. 


11-  I-  ^•'j  GOOD    FAITH   AND   VALUE. 


399 


But  then  I  think  that  such  evidence  of  carelessness  or  blindness 
as  I  have  referred  to  may  with  other  evidence  be  good  evidence 
upon  the  question  which,  I  take  it,  is  the  real  one,  whether  he  did 
know  that  there  was  something  wrong  in  it.  If  he  was  (if  I  may  use 
the  phrase)  honestly  blundering  and  careless,  and  so  took  a  bill  of 
exchange  or  a  bank-note  when  he  ought  not  to  have  taken  it,  still 
he  would  be  entitled  to  recover.  But  if  the  facts  and  circumstances 
are  such  that  the  jury,  or  whoever  has  to  try  the  question,  came  to 
the  conclusion  that  he  was  not  honestly  blundering  and  careless,  but 
that  he  must  have  had  a  suspicion  that  there  was  something  wrong, 
and  that  he  refrained  from  asking  questions,  not  because  he  was  an 
honest  blunderer  or  a  stupid  man,  but  because  he  thought  in  his  own 
secret  mind  —  I  suspect  there  is  something  wrong,  and  if  I  ask  ques- 
tions and  make  further  inquiry,  it  will  no  longer  be  my  suspecting 
it,  but  my  knowing  it,  and  then  I  shall  not  be  able  to  recover —  I 
think  that  is  dishonesty.  I  think,  my  Lords,  that  that  is  established, 
not  only  by  good  sense  and  reason,  but  by  the  authority  of  the  cases 
themselves. 

I  think,  my  Lords,  that  since  the  repeal  of  the  Usury  Laws  we 
can  never  inquire  into  the  question  as  to  how  much  was  given  for  a 
bill,  and  if  Searby  was  in  such  a  position  that  he  could  have  proved 
against  the  estate  it  would  have  been  no  objection  at  all  that  he  con- 
veyed these  bills  to  another  for  a  nominal  amount,  that  he  sold  bills 
nominally  amounting  to  ^1,727  for  ^200.  Although  I  think  that 
could  not  have  been  inquired  into,  yet  the  amount  given  in  compari- 
son with  the  apparent  value  is  an  important  piece  of  evidence  guid- 
ing us  to  a  conclusion  as  to  whether  or  not  it  was  a  /M>//a  fide 
transaction.  I  am  sure  of  this,  that  in  criminal  cases  the  general 
evidence  that  is  given  to  show  that  the  receiver  of  goods  which  were 
stolen  knew  that  they  were  stolen  is  that  he  has  given  a  great  under 
value  for  them.  That  is  not  by  any  means  conclusive,  because  it 
may  very  well  be  that  he  has  given  the  undervalue  under  circum- 
stances which  do  not  suffice  to  prove  that  he  had  a  felonious  inten- 
tion, or  a  felonious  knowledge,  which  would  be  required  to  make 
him  guilty.  In  like  manner,  I  think  if  it  is  shown  that  a  considera- 
ble undervalue  was  given  for  bills,  although  that  alone  would 
probably  not  be  sufficient,  it  is  an  element,  and  an  important  ele- 
ment, in  considering  whether  the  man  who  gave  that  undervalue 
was  bona  fide  doing  it  because  he  was  in  honest  blundering  and 
stupidity  taking  the  thing  without  knowing  that  he  was  commilling 
or  assisting  in  fraud,  or  because  he  had  a  suspicion  that  he  would 
deprive  himself  of  a  good  bargain  if  he  made  too  much  inquiry  and 
so  had  it  brought  home  to  him  that  there  was  fraud. 


400  HOLDER   IN   DUE   COURSE:    REQUISITES.  [ART.  V. 

(c/)  Must  be  taken  luithout  notice  of  infirmity  or  defect. 

§  95  [56]  <^ooDMAN  V.  Harvey,  4  Adolphus  &  Ellis,  870.  —  1836. 
Lord  Denman,  C.  J.  —  The  question  I  offered  to  submit  to  the  jury- 
was  whether  the  plaintiff  had  been  guilty  of  gross  negligence  or  not. 
I  believe  we  are  all  of  opinion  that  gross  negligence  only  would  not 
be  a  sufficient  answer,  where  the  party  has  given  consideration  for 
the  bill.  Gross  negligence  may  be  evidence  of  tfiaia  fides ^  but  is  not 
the  same  thing.  We  have  shaken  off  the  last  remnant  of  the  con- 
trary doctrine.'  Where  the  bill  has  passed  to  the  plaintiff  without 
any  proof  of  bad  faith  in  him,  there  is  no  objection  to  his  title. 
The  evidence  in  this  case  as  to  the  notarial  marks''  could  only  weigh 
as  rendering  it  less  likely  that  the  bill  should  have  been  taken  in 
perfect  good  faith. ^ 


§  95  HAMILTON  V.  VOUGHT.  [§  56] 

34  New  Jersey  Law,  187.  —  1870. 

Beasley,  Chief  Justice.  — We  have  presented  to  our  consideration 
in  this  case  but  a  single  question,  viz.,  whether  the  title  of  a  holder 
of  negotiable  paper,  acquired  before  it  was  due,  for  a  valuable  con- 
sideration, is  affected  by  the  fraud  of  a  prior  party,  without  proof  of 
bad  faith  on  the  part  of  such  holder. 

At  the  trial  of  this  cause,  the  jury  was  instructed  that  if  the  holder 
of  the  note  sued  on  —  the  plaintiff  in  the  action  —  acquired  his  title 
under  circumstances  which  should  have  put  a  person  of  ordinary 
prudence  upon  his  guard,  the  note  was  invalid,  if  its  inception  had 
been  fraudulent. 

The  verdict  was  in  favor  of  the  defence,  and  the  plaintiff  now 
insists  that  the  judicial  instruction  should  have  been,  that  suspicious 
circumstances  attending  the  acquisition  of  his  title  were  not  sufficient 
to  defeat  his  claim,  unless  of  a  character  to  raise  a  conviction  of 
actual  fraud  on  his  part. 

'  The  contrary  doctrine  was  held  in  the  earlier  cases  of  Gill  v.  Cidntt,  3  B.  & 
C.  466  (1824)  and  Crook  v.  fadis,  5  B.  &  Ad.  909  (1834).  —  Ed. 

^  Ordinarily  the  presence  of  notarial  marks  of  dishonor  on  the  paper  is  con- 
structive notice,  but  the  facts  of  this  case  were  such  as  to  involve  only  the 
question  of  actual  notice,  or  bad  faith.  —  Ed. 

^  The  doctrine  of  this  case,  that  negligence  however  gross  is  not  equivalent  to 
notice,  but  is  merely  evidence  of  bad  faith,  is  now  generally  followed  in  the 
application  of  the  law  of  notice  to  the  purchase  of  negotiable  paper.  See  the 
matter  fully  discussed  and  Goodman  v.  Harvey  approved  in  Goodman  v.  Si?nonds 
(20  How.  [U.  S.]  343);  Scybel  v.  Natio7ial  Currency  Bank  (54  N.  Y.  288),  and 
Phelan  v.  Moss  (67  Pa.  St.  59).  —  Ed. 


II.  I.  ^/.]  NOTICE:   WHAT   CONSTITUTES.  4OI 

Counsel  who  so  ably  argued  this  case  in  behalf  of  defendant,  did 
not  deny  that  the  modern  English  authorities  were  hostile  to  their 
position,  but  they  went  upon  the  ground  that  the  rule  thus  sanctioned 
was  an  innovation,  and  consequently  would  not  be  followed  by  this 
court.  The  ancient  rule,  it  was  maintained,  is  that  declared  in  Gill 
V.  Cubitt  (3  Barn.  &:  Cress.  466).  This  decision  was  made  in  the 
year  1824,  and,  beyond  all  question,  it  sustains  the  principle  now 
claimed  by  the  defence,  for  in  the  reported  case  referred  to  the  jury 
were  explicitly  told  that  "there  were  two  questions  for  their  con- 
sideration: first,  whether  the  plaintiff  had  given  value  for  the  bill, 
of  which  there  could  be  no  doubt;  and,  secondly,  whether  he  took 
it  under  circumstances  which  ought  to  have  excited  the  suspicions 
of  a  prudent  and  careful  man."  The  authority  is  directly  in  point, 
and  the  only  question  which  can  arise  is,  whether  it  correctly  states 
the  ancient  rule  of  the  common  law  upon  the  subject. 

My  first  remark  in  this  connection  is,  that  from  the  opinion  of  the 
judges  in  the  case  of  Gill  v.  Cubitt,  it  appears  that  the  doctrine 
adopted  was  intended  to  be  an  innovation  upon  the  antecedent 
practice,  and  that  it  was  avowedly  opposed  to  a  decision  of  the 
greatest  weight.  Twenty-three  years  before,  in  the  year  1801,  Lord 
Kenyon,  in  Lawson  v.  Weston  (4  Esp.  56),  had  expressly  repudiated 
the  idea  that  suspicious  circumstances,  in  the  absence  of  actual 
fraud,  would  avoid  a  note  in  the  hands  of  a  holder  for  value.  But 
this  doctrine  did  not  harmonize  with  the  views  of  the  judges  in  the 
case  of  Gill  v.  Cubitt,  and  it  was  accordingly  overruled.  Thus, 
Chief  Justice  Abbott  says,  in  his  opinion:  "  I  think  the  sooner  it  is 
known  that  the  case  of  Lawson  v.  Weston  is  doubted,  at  least  by 
this  court,  the  better.  I  wish  doubts  had  been  cast  on  that  case  at 
an  earlier  time."  And  he  concludes:  "  For  these  reasons,  notwith- 
standing all  the  unfeigned  reverence  I  feel  for  everything  that  fell 
from  Lord  Kenyon,  by  whom  Lawson  v.  Weston  was  decided,  I  can- 
not-think  that  the  view  taken  by  that  learned  lord  was  a  correct  one. 
Nor  is  this  rejection  of  this  antecedent  decision  attempted,  in  the 
slightest  degree,  to  be  put  upon  the  foundation  of  pre-existing  author- 
ity. Not  a  case  is  referred  to  for  its  justification,  and  although  in  Law- 
son  v.  Weston,  the  authority  of  Lord  Mansfield,  in  Miller  v.  Race,  was 
mooted,  no  remark  is  made  on  that  circumstance.  I  think  a  perusal 
of  the  opinions  in  Gill  v.  Cubitt  will  satisfy  anyone  that  it  was  a  well- 
understood  intention  to  deviate  from  the  legal  rule  upon  this  subject 
which  had  previously  existed;  or,  if  any  doubt  should  remain,  such 
doubt  will  certainly  be  dispelled  by  a  reference  to  the  case  of  Slater 
v.  West  (3  Carr  &  Payne,  325),  decided  in  the  year  1828,  in  which 
Chief  Justice  Abbott  (then  Lord  Tenterden),   in  laying  down    the 

NEGOT.   INSTRUMENTS — 26 


402  HOLDER   IN   DUE   COURSE :    REQUISITES.  [ART.  V. 

doctrine  that  a  person  is  not  entitled  to  recover  wlio  takes  a  bill  of 
exchange  "  under  circumstances  which  ought  to  excite  suspicions  in 
the  mind  of  a  reasonable  man,"  says:  "  This  doctrine  is  of  modern 
origin.  I  believe  I  was  the  first  judge  who  decided  this  point  at  nisi 
prius.  The  court  to  which  I  belong  confirmed  my  decision,  and  the 
other  courts  have,  I  believe,  acted  on  the  same  principle."  And 
Chief  Justice  Bayley,  in  his  opinion  in  Gill  v.  Ci/bitt,  is  equally 
explicit.  "But,  it  is  said"  —  such  is  his  language  —  "that  the 
question  usually  submitted  for  the  consideration  of  the  jury  in  cases 
of  this  description,  up  to  the  period  of  time  at  which  my  Lord  Chief 
Justice's  direction  was  given,  has  been  whether  the  bill  was  taken 
bona  fide,  and  whether  a  valuable  consideration  was  given  for  it. 
I  admit  that  has  been  generally  the  case." 

From  these  citations,  I  think  it  is  manifest  that  the  judges 
who  participated  in  the  decision  of  the  case  of  Gill  v.  Cubitt 
were  aware  that  by  the  views  expressed  by  them,  they  intro- 
duced a  novelty,  and  departed  from  the  older  practice  of  the 
courts.  That  the  principle  adopted  in  that  case  was  an  inno- 
vation, seems  to  me  unquestionable.  I  have  shown  that  it  is 
irreconcilable  with  Lawson  v.  Weston.  So  it  plainly  occupies  the 
same  relation  to  the  case  of"  Peacock  v.  Rhodes  {Doug.  632),  decided 
by  Lord  Mansfield  in  1781.  The  rule  which  it  endeavors  to  over- 
throw will  be  found  sustained  in  Miller  v.  Race  (i  Burr.  452);  Price 
V.  Neal  (3  Burr.  1355);  Grants.  Vaughn  {t,  Burr.  15 16);  Anonytnous 
(i  Lord  Raymond,  738);  Morris  v.  Lee  (2  Lord  Raymond,  1396.) 
There  was  not  a  case  cited  upon  the  argument,  nor  have  my  researches 
led  me  to  one  anterior  to  the  decision  of  Gill  v.  Cubitt,  which  sus- 
tains the  doctrine  there  propounded.  I  confidently  conclude,  there- 
fore, that  the  case  above  criticised  cannot  stand  on  the  ground  of 
ancient  authority.  In  my  apprehension,  the  original  rule  as  it 
existed  in  the  time  of  Lords  Kenyon  and  Mansfield  was,  that  nothing 
short  of  mala  fides  would  vitiate  the  title  of  the  holder  of  negotiable 
paper  taking  it  for  value,  before  maturity.  It  is  entirely  out  of  the 
question,  therefore,  for  this  court  to  regard  Gill  y .  Cubitt  z.-;,  impera- 
tive authority.  It  is  true  that  that  case  was  followed  for  a  time  to 
a  considerable  extent  by  the  English  courts.  But,  as  I  have  already 
said,  in  England  the  original  rule  has  been  reinstated.  In  Backhouse 
V.  Harrison  (5  B.  &  Ad.  1098),  Mr.  Justice  Patterson  says:  "  I  have 
no  hesitation  in  saying  that  the  doctrine  first  laid  down  in  Gill  v. 
Cubitt,  and  acted  upon  in  other  cases,  has  gone  too  far  and  ought  to 
be  restricted."  And  in  Goodman  v.  Harvey  (4  Ad.  &  El.  870),  Lord 
Denman  thus  forcibly  expresses  the  rule  at  present  prevailing  in  the 
courts  at  Westminister:     "  The  question  I  offered  to  submit  to  the 


11.  I.  ^/.]  NOTICE  :   WHAT    CONSTITUTES. 


403 


jury  was,  whether  the  plaintiff  had  been  guilty  of  gross  negligence 
or  not.  I  believe  we  are  all  of  opinion  that  gross  negligence  only 
would  not  be  a  sufficient  answer  where  the  party  has  given  con- 
sideration for  the  bill.  Gross  negligence  may  be  evidence  of  mala 
fides,  but  it  is  not  the  same  thing.  We  have  shaken  off  the  last 
remnant  of  the  contrary  doctrine.  Where  the  bill  has  passed  to  the 
plaintiff  without  any  proof  of  bad  faith  in  him,  there  is  no  objection 
to  his  title."  The  following  cases  recognize  and  enforce  the  same 
rule:  {Uther  v.  Rich,  10  Ad.  &  El.  784;  Artbouin  v.  Anderson,  i 
Ad.  &  El.  (N.  S.)498;  Stephens  \.  Foster,  i  Cromp.,  Mees.  &  Ros. 
894;  Palmer  v.  Richards,  i  Eng.  L.  &  Eq.  529;  Marston  v.  Allen,  8 
Mees  &  Wels.  494;  Raphael  x.  Rank  of  England,  17  C.  B.  161.) 

An  examination  of  the  American  reports  will  disclose  a  similar 
mutation  of  judicial  opinion  upon  this  subject.  For  a  time,  in 
several  of  the  States,  the  rule  broached  in  the  case  of  Gill  v.  Cubitt 
has  been  acted  upon;  but  now,  in  most  of  them,  and  in  those  of  the 
most  commercial  importance,  that  rule  has  been  entirely  discarded. 
(34  New  York,  247,  Magee  v.  Badger;  7  Bosworth,  543,  Bel.  Bank  of 
Ohio  v.  Hoge  et  al.j  10  Cush.  488,  Worcester,  etc.,  Bank  v.  Dorchester, 
etc.,  Bank;  4  Geo.  287,  Mathews  v.  Foythressj  6  Md.  509,  Ellicott  v. 
Martin;   t,^  New  Hamp.  273,  Crosby  v.  Grant.^ 

The  subject  has  also  recently  been  settled,  after  an  elaborate  dis- 
cussion and  full  consideration  in  the  Supreme  Court  of  the  United 
States,  in  the  case  of  Goodman  v.  Simonds  (20  How.  343),  the  result 
being  an  explicit  repudiation  of  the  doctrine  that  suspicious  circum- 
stances will,  per  se,  vitiate  the  title  to  commercial  paper. 

From  this  brief  review  of  the  cases,  I  think  it  may  be  safely  said 
that  the  doctrine  introduced  by  Lord  Tenderden  stands  at  the  pre- 
sent moment  marked  with  the  disapproval  of  the  highest  judicial 
authority.  Nor  does  such  disapproval  rest  upon  merely  speculative 
grounds.  That  doctrine  was  put  in  practice  for  a  course  of  years, 
and  it  was  thus,  from  experience,  found  to  be  inconsistent  with  true 
commercial  policy.  Its  defect  —  a  great  defect,  as  I  think  —  was, 
that  it  provided  nothing  like  a  criterion  on  which  a  verdict  was  to  be 
based.  The  rule  was,  that  to  defeat  the  note,  circumstances  must 
be  shown  of  so  suspicious  a  character  that  they  would  put  a  man  of 
ordinary  prudence  on  inquiry  —  and  by  force  of  such  a  rule  it  is 
obvious  every  case  possessed  of  unusual  incidents  would,  of  neces- 
sity, pass  under  the  uncontrolled  discretion  of  a  jury.  An  incident 
of  the  transaction  from  which  any  suspicion  could  arise  was  suffi- 
cient to  take  the  case  out  of  the  control  of  the  court.  There  was  no 
judicial  standard  by  which  suspicious  circumstances  could  be 
measured  before  committing  them  to  the  jury.     And  it  is  precisely 


404  HOLDER   IN    DUE   COURSE:    REQUISITES.         [ART.  V. 

this  want  which  the  modern  rule  supplies.  When  jnala  fides  is  the 
point  of  inquiry,  suspicious  circumstances  must  be  of  a  substantial 
character,  and  if  such  circumstances  do  not  appear,  the  court  can 
arrest  the  inquiry.  Under  the  former  practice,  circumstances  of 
slight  suspicion  would  take  the  case  to  the  jury;  under  the  present 
rule,  the  circumstances  must  be  strong,  so  that  bad  faith  can  be  rea- 
sonably inferred.  Thus  the  subject  has  passed  from  the  indefinite 
to  comparatively  definite;  from  the  intangible  to  the  comparatively 
tangible.  From  a  mere  matter  of  fact,  the  question,  to  some  extent, 
has  become  one  of  law. 

I  cannot  doubt,  when  we  recollect  that  inquiries  of  this  nature 
always  attend  that  class  of  cases  where  judgments  are  sought  against 
innocent  and  unfortunate  parties,  that  the  change  is  most  beneficial. 
All  experience  has  shown  how  hard  it  is  to  prevent  juries  from  seiz- 
ing on  the  slightest  circumstance,  to  avoid  giving  a  verdict  against 
the  maker  of  a  note  which  had  been  obtained  by  fraud  or  theft.  To 
preserve  the  negotiability  of  commercial  paper  and  guard  the  inter- 
ests of  trade,  it  is  absolutely  necessary  that  large  power  should  be 
placed  in  the  judicial  hand  when  the  question  arises  as  to  what  facts 
are  sufficient  to  defeat  the  claim  of  the  holder  of  a  note  or  bill  which 
has  been  taken  before  maturity,  and  for  which  value  has  been  paid. 
It  is  only  in  this  mode  that  the  requisite  stability  in  transactions  of 
this  kind  can  be  retained. 

But  I  do  not  think  the  difference  between  the  two  rules  above  dis- 
cussed is  as  great  as  some  persons  have  supposed.  In  my  appre- 
hension, the  entire  variance  consists  in  the  degree  of  proof  which  the 
court  will  require  in  order  to  submit  the  inquiry  to  the  jury.  Mere 
carelessness  in  taking  the  paper  will  not,  of  itself,  impair  the  title  so 
acquired;  but  carelessness  may  be  so  gross  that  bad  faith  may  be 
inferred  from  it.  Nor  is  it  necessary,  in  order  to  defeat  the  title  of 
the  holder,  that  he  have  actual  knowledge  of  the  facts  and  circum- 
stances constituting  the  particular  fraud;  it  is  sufficient  if  he  have 
knowledge  that  the  paper  is  tainted  with  any  fraud,  although  he  may 
be  ignorant  of  the  nature  of  it.  In  the  case  of  May  v.  Chapman  (i6 
Mees  &  W.  355),  Baron  Parke  says:  "  I  agree  that  '  notice  and 
knowledge  '  means  not  merely  express  notice,  but  knowledge,  or  the 
means  of  knowledge,  to  which  the  party  wilfully  shuts  his  eyes." 
Reviewed  in  this  sense,  as  I  have  already  remarked,  the  principle 
seems  to  me  a  highly  salutary  one,  and,  in  the  language  of  Professor 
Parsons,  is  well  ''  adapted  to  the  free  circulation  of  negotiable  paper 
and  the  true  interests  of  trade."     (i  Par.  B.  &  N.  259.) 

I  think  a  new  trial  should  be  granted. 


II.   I.  </.]  NOTICE:   WHAT    CONSTITUTES.  405 

§  95  L56]  HoTCHKiss  V.  National  Banks,  21  Wallace  (U.  S.),  354, 
359.  —  1874.  Mr.  Justice  Field.  —  "  The  law  is  well  settled  that 
a  party  who  takes  negotiable  paper  before  due  for  a  valuable  con- 
sideration, without  knowledge  of  any  defect  of  title,  in  good  faith, 
can  hold  it  against  all  the  world.  A  suspicion  that  there  is  a  defect 
of  title  in  the  holder,  or  a  knowledge  of  circumstances  that  might 
excite  such  suspicion  in  the  mind  of  a  cautious  person,  or  even  gross 
negligence  at  the  time,  will  not  defeat  the  title  of  the  purchaser. 
That  result  can  be  produced  only  by  bad  faith,  which  implies  guilty 
knowledge  or  wilful  ignorance,  and  the  burden  of  proof  lies  on  the 
assailant  of  the  title.  It  was  so  expressly  held  by  this  court  in 
Murray  v.  Lardner  (2  Wallace,  no.)  See,  also,  Goodmanv.  Sinwnds, 
(20  Howard,  343),  where  Mr.  Justice  Swayne  examined  the  leading 
authorities  on  the  subject  and  gave  the  conclusion  we  have  stated."  ' 


95  CHAPMAN  V.  ROSE.  [§  56] 

56  New  York,  137.  —  1874. 
\Reported  hereiji  at  p.  435.] 


§  95  NATIONAL  BANK  OF  COMMONWEALTH  v.  LAW.  [§56] 

127  Massachusetts,  72.  —  1879. 

Contract,  against  maker  and  indorsers  of  the  following  instru- 
ment: — 
I3000.  New  Yokk  January  20,  1877. 

Four  months  after  date  I  promise  to  pay  to  the  order  of  Charles  F.  Parker  & 
Co.  three  thousand  dollars  at  the  National  Bank  of  Commerce,  Boston,  Mass. 

Value  received. 

Alexander  L.\w. 

[Indorsed]:  John  Savery's  Sons. 

Charles  F.  Parker  &  Co. 

Law  was  a  member  of  the  fum  of  Charles  F.  Parker  &  Co.,  and 
also  of  the  firm  of  John  Savery's  Sons.  Law  indorsed  the  firm  name 
of  "  John  Savery's  Sons  "  and  one  D.  (a  partner),  indorsed  the  firm 
name  of  Charles  F.  Parker  &  Co.,  and  deposited  the  note  as  coK 
lateral  for  a  loan  at  plaintiff  bank.  The  note  was  in  fact  made  with- 
out authority  of  the  firm  of  John  Savery's  Sons  and  in  fraud  of  the 
firm.     The  trial  judge  ruled  that,  from  the  form  of  the  note  itself, 

'See  also  Stoddard  v.  Burton,  41  Iowa,  582, /w/,  p.  571.  —  Ed. 


406  HOLDER   IN    DUE    COURSE:    REQUISITES.  [ART.  V. 

plaintiff  was,  as  matter  of  law,  affected  with  notice  of  the  defence 
existing  to  the  note  on  the  part  of  the  defendants  (John  Savery's 
Sons),  other  than  Law,  and  directed  a  verdict  for  such  defendants. 
If  this  ruling  was  incorrect,  a  new  trial  was  to  be  ordered;  otherwise, 
judgment  on  the  verdict. 

Gray,  C.  J.  [After  deciding  that  the  liability  of  John  Savery's 
Sons  was  secondary  to  that  of  Law.]  '  One  partner  has  no  authority, 
without  the  assent  of  his  copartners,  to  sign  the  name  of  the  part- 
nership to  a  note  for  the  individual  debt  of  himself  or  of  a  stranger; 
and  all  persons  who  take  such  a  note  with  knowledge,  either  from 
its  appearance  or  otherwise,  that  it  was  made  for  the  separate  accom- 
modation of  one  partner  or  of  another  person,  cannot  recover 
against  the  other  partners  without  proving  their  authority  or  assent. 
In  the  present  case,  the  defendants'  name  being  upon  the  back  of 
the  note  above  that  of  the  payees,  it  was  apparent  upon  the  note 
itself,  read  in  the  light  of  the  statute,  which  everyone  was  bound  to 
know,  that  the  liability  of  the  partnership  was  but  conditional  and 
secondary,  and  therefore  thsit,  prii/ia  facie  at  least,  their  signature 
was  affixed  for  the  accommodation  and  benefit  of  Law;  and  the 
ruling  at  the  trial  was  correct.  {Angle  \.  Northwestern  Ins.  Co.,  92 
U.  S.  330;  JVest  St.  Louis  Savings  Bank  v.  Shaiunee  Bank.,  95  U.  S. 
557;  Ckazournes  v.  Edwards,  3  Pick.  5;  Sweetser  v.  French,  2  Cush. 
309;  Rollins  \.  Stevens,  31  Maine,  454;  Fielden  v.  Lahens,  2  Abbott, 
N.  Y.    App.  Ill;   Lenioine  v.  Bank  of  North  America,   3  Dillon,  44.) 

Judgment  on  the  verdict.'' 

'  Mass.  St.  of  1S74,  c.  404.     See  Neg.  Inst.  L.,  ^  114  [64].  —  Ed. 

-  Similar  notes  were  made  by  Law  and  indorsed  yfrj/,  in  the  name  of  Charles 
F.  Parker  &  Co.,  and  second,  in  the  name  of  John  Savery's  Sons,  and  discounted 
for  D.  by  plaintiff.  The  trial  judge  made  the  same  ruling  as  above.  Held :  error. 
"  Upon  the  face  of  the  note  in  this  case,  there  is  nothing  which  indicates  any 
irregularity  or  invalidity  in  the  origin  or  negotiability  of  it."  The  note  indi- 
cates that  Charles  F.  Parker  &  Co.  had  transferred  it  to  John  Savery's  Sons,  and 
the  latter  by  blank  indorsement  to  a  new  holder.  There  is  no  conclusive  evidence 
that  plaintiff  knew  it  was  discounting  the  note  for  C.  F.  Parker  &  Co.  The  in- 
ference is  quite  as  natural  that  D.  was  the  owner.  Freeman's  National  Bank  v. 
Savery,  127  Mass.  75,  78. 

Where  one  of  four  partners  signed  in  his  individual  name  a  note  payable  to 
his  firm,  and  another  partner  indorsed  the  firm  name,  and  the  first  partner  then 
took  the  note  to  the  plaintiff,  filled  in  certain  blanks  in  plaintiff's  presence,  and 
transferred  the  note  to  plaintiff  to  take  up  another  similarly  executed,  but  plain- 
tiff testified  that  he  had  no  knowledge  that  the  loan  was  not  for  the  benefit  of  the 
firm,  held,  that  there  is  no  conclusive  proof,  as  matter  of  law,  from  the  form  of 
the  note  or  other  circumstance,  that  plaintiff  had  notice  that  the  indorsement 
was  for  the  maker's  accommodation.  It  was  a  question  of  fact  for  the  jury. 
Wait  v.  7 hayer,  118  Mass.  473. 


II.   I-  a'.]  NOTICE  :    WHAT   CONSTITUTES.  407 

§  95  CHEEVER  V.  PITTSBURGH,  ETC.,  R.  CO.        [§  56] 

150  New  York,  59.  —  1896. 

Action  by  holder  against  maker.  Judgment  for  defendants. 
Plaintiff  appeals. 

O'Brien,  J.  — The  complaint  in  this  action  contained  four  separate 
causes  of  action,  each  upon  a  promissory  note  of  the  defendant. 
The  last  two  causes  of  action  were  not  defended,  and  upon  these  the 
plaintiff  recovered,  but  was  defeated  upon  the  two  notes  embraced  in 
the  first  and  second  causes  of  action.  The  defence  to  these  two  notes 
was  that  they  were  made  by  the  defendant's  president,  one  M.  S. 
Frost,  and  by  him  wrongfully  diverted  from  the  uses  and  purposes 
for  which  they  were  intended  to  his  own  personal  or  private  benefit, 
or  the  benefit  of  a  firm  of  which  he  was  a  member,  and  that  the 
plaintiff  is  not  a  bona  fide  holder,  but  chargeable  with  notice  of 
these  facts. 

The  following  are  copies  of  the  two  notes  in  controversy,  with  the 
indorsements  thereon  when  put  in  circulation  by  the  defendant's 
president: 
$5,000.  Greenville,  Pa.,  Feb'y  24th,  1888. 

Four  months  after  date  the  Pittsburgh,  Shenango  and  Lake  Erie  Railroad 
Company  promises  to  pay  to  the  order  of  John  T.  Bruen  five  thousand  dollars, 
at  the  American  Exchange  National  Bank,  New  York  City.     Value  received. 

Attest:   E.  S.  Templeton,  Secretary. 

The  Pittsburgh,  Shenango  &  Lake  Erie  Railroad  Company, 

By  M.  S.  Frost,  President. 

D.  loaned  money  to  the  firm  of  Stewart,  Hammond  &  Mead,  taking  a  note 
signed  by  Hammond  and  indorsed  by  the  firm.  This  firm  was  dissolved,  and 
the  firm  of  Hammond  &  Scripture  was  formed.  Hammond  arranged  with  D. 
to  retain  the  money  for  the  benefit  of  the  firm  of  Hammond  &  Scripture,  and 
gave  D.  a  new  note  signed  by  Hammond  and  indorsed  in  the  firm  name. 
Scripture  had  no  knowledge  of  this.  Held :  Scripture  not  liable.  "  We  do  not 
think  a  partner  can  shift  his  private  indebtedness  from  his  own  shoulders  to 
those  of  his  firm  by  offering  to  his  creditor  to  pay  his  debt,  and  then  asking  him 
to  lend  the  amount  to  the  firm  of  which  he  is  a  member,  and  thereupon,  on 
the  creditor's  assenting,  giving  him  without  anything  more  a  firm  note  for  the 
amount,  unless  it  is  shown  that  the  transaction  is  in  some  way  brought  to  the 
knowledge  of  and  assented  to  by  the  other  member  or  members  of  the  firm.  It 
certainly  would  open  a  wide  door  to  fraud  to  admit  such  a  doctrine."  Daniels 
V.  Hammond,  154  Mass.  165. 

The  results  of  the  cases  on  constructive  notice  from  the  form  of  the  paper  in 
the  case  of  partnership  signatures  upon  bills  or  notes  negotiated  by  or  for  a 
partner  for  his  own  benefit,  are  fully  stated  in  Ames'  Cases  on  Partnership, 
pp.  526,  527-529,  533-534.  See  the  same  work  (pp.  496-521)  for  a  discussion  of 
the  subject  of  the  authority  of  a  partner  to  execute  or  transfer  negotiable  instru- 
ments in  behalf  of  his  firm,  and  the  manner  in  which  such  instruments  must  be 
executed  in  order  to  bind  the  partnership.  —  Ed. 


408  HOLDER  IN   DUE   COURSE  :   REQUISITES.  [ART.  V. 

[Indorsed]: 

Pay  to  the  order  of  M.  S.  Frost  &  Son. 

John  T.  Bruen. 

M.  S.  Frost  &  Son. 

$5,000.00.  Greenville,  Pa.,  Feb'y  24th,  1888. 

Three  months  after  date  the   Pittsburgh,  Shenango  and   Lake  Erie   Railroad 
Company  promises  to  pay  to  the  order  of  John  T.  Bruen  five  thousand  dollars, 
at  the  American  Exchange  National  Bank,  New  York  city.     Value  received. 
Attest:    E.  S.  Templeton,  Secretary. 

The  Pittsburgh,  Shenango  &  Lake  Erie  Railroad  Company, 

By  M.  S.  Frost,  President- 
[Indorsed]:  John  T.  Bruen, 

M.  S.  Frost  &  Son. 

The  body  of  these  notes,  and  every  part  of  them  except  the  signa- 
ture of  the  president,  was  in  the  handwriting  of  Templeton,  the 
secretary.  The  president  was  authorized  by  the  board  of  directors 
to  issue  the  corporate  notes  to  the  extent  of  $10,000  for  the  purpose 
of  purchasing  flat  cars.  In  March,  1888,  before  the  notes  became 
due,  Frost  went  to  Boston  and  there  negotiated  a  cash  loan  of 
$30,000  from  Francis  A.  Brooks  for  the  benefit  of  M.  S.  Frost  &  Son, 
giving  the  firm  note  therefor  and  delivering  to  him  the  two  notes  in 
question,  indorsed  as  they  now  appear,  with  other  obligations,  as 
collateral  security  for  the  payment  of  this  loan.  Subsequent  to  the 
maturity  of  the  notes  Brooks  became  the  absolute  owner  by  consent 
of  the  pledgor  and  the  proceeds  applied  upon  the  debt,  and  still 
later  he  transferred  them  to  a  third  party,  and  they  have  come  to 
the  hands  of  the  plaintiff  for  value.  It  is  not  claimed  that  the 
plaintiff  occupies  any  other  or  different  position  than  Brooks  would 
if  he  had  brought  the  action  upon  the  notes  at  maturity.  Bruen, 
the  payee  of  the  notes,  was  the  private  secretary  of  Frost,  the  presi- 
dent, and  the  notes  were  made  payable  to  him  by  Templeton,  the 
secretary  of  defendant,  who  drew  them  in  that  form  at  the  suggestion 
of  the  president.  There  is  not  and  cannot  be  any  dispute  with 
respect  to  the  authority  of  Frost  to  make  the  notes.  They  were 
made  with  sufficient  authority,  the  fraud  upon  the  defendant  consist- 
ing in  the  wrongful  use  of  them,  when  made  for  a  legitimate  purpose, 
by  the  president  for  his  own  private  business. 

Nor  is  there  any  dispute  with  respect  to  the  fact  appearing  on  the 
plaintiff's  case,  that  Brooks  paid  value  for  the  notes  and  made  pre- 
sent advances  in  cash  to  Frost  in  the  sum  already  stated.  It  is 
equally  clear  upon  the  record  that  Brooks  had  no  actual  knowledge 
of  the  facts  surrounding  the  origin  of  the  paper  or  of  the  diversion 
of  it  by  the  president.  He  received  the  notes  and  made  the  advances 
in  Boston,  whereas  they  were  made  and  the  transactions  stated  with 


II.   I.  ^.J  NOTICE  :    WHAT   CONSTITUTES.  4O9 

respect  to  them  took  place  in  a  distant  state,  where  the  office  of  the 
company  was,  and  is  indicated  on  the  paper  as  the  place  where  made. 
The  learned  trial  judge  held  as  matter  of  law  that  the  plaintiff 
could  not  recover  upon  the  notes  for  the  reason  that  he  was  charge- 
able with  knowledge  of  the  facts  and  circumstances  that  rendered 
them  invalid  in  the  hands  of  Frost.  The  plaintiff  is,  doubtless, 
chargeable  with  such  knowledge  or  notice  as  to  the  antecedent 
equities  of  the  defendant  as  Brooks,  his  assignor,  had,  but  with  no 
others.  If  the  notes  were  valid  obligations  in  the  hands  of  Brooks 
the  plaintiff  may  assert  every  right  that  he  could  have  asserted.  It 
needs  no  argument  to  show  that  if  Brooks  had  knowledge  or 
notice  or  is  in  law  chargeable  with  knowledge  or  notice  of  the 
fraud  by  means  of  which  the  notes  were  diverted  from  the  pur- 
pose for  which  they  were  authorized  to  be  made,  that  the  plain- 
tiff cannot  recover.  But  it  is  not  claimed  that  he  knew  anything 
about  the  origin  or  diversion  of  the  paper  in  fact.  All  that  is 
claimed  is  that  when  it  was  presented  to  him  in  Boston  by  Frost, 
whom  he  knew  to  be  the  president  of  the  railroad,  there  was  enough 
upon  the  face  of  the  paper  to  put  him  upon  inquiry  and,  therefore, 
to  charge  him  with  knowledge  of  all  the  facts  that  such  inquiry 
would  have  disclosed.  He  knew  nothing,  so  far  as  appears,  outside 
of  the  paper  itself,  except  the  fact  that  the  party  presenting  it  was 
defendant's  president,  and  that  he  was  proposing  to  pledge  the  notes 
for  his  own  debt,  or  rather  for  the  debt  of  his  firm,  which  for  all  the 
purposes  of  the  question  may  be  assumed  to  be  the  same  thing.  The 
question  in  the  case  is,  therefore,  reduced  to  a  very  narrow  inquiry, 
and  that  is,  whether  Brooks,  standing  in  all  other  respects  in  the 
position  and  sustaining  the  character  of  a  bona  fide  purchaser  of 
negotiable  paper,  is  deprived  of  that  character  and  the  benefits  of 
that  position  by  reason  of  anything  appearing  upon  the  face  of  the 
notes  themselves. 

The  mind,  at  the  threshold  of  the  inquiry,  encounters  two  princi- 
ples that  point  in  opposite  directions  and  lead  to  different  conclu- 
sions, as  the  one  or  the  other  is  allowed  to  preponderate  in  the 
mental  process  of  determining  the  legal  rights  of  the  parties.  On 
the  one  hand  is  the  principle  which  protects  a  bone  fide  holder  of 
commercial  paper  from  existing  antecedent  equities  between  the 
parties,  and  on  the  other  the  principle  which  protects  a  corporation 
from  the  unauthorized  and  fraudulent  acts  of  its  own  officers.  There 
is  not  much  difficulty  in  stating  the  rule  of  law  defining  the  duties 
and  obligations  of  a  party  to  whom  negotiable  paper  is  presented 
for  discount  or  sale  before  due.  He  is  not  bound  at  his  peril  to  be 
on  the  alert  for  circumstances  which  might  possibly  excite  the  sus- 


410  HOLDER   IN    DUE   COURSE  :    REQUISITES.  [ART.   V. 

picion  of  wary  vigilance;  he  does  not  owe  to  trie  party  wlio  puts  the 
paper  afloat  the  duty  of  active  inquiry  in  order  to  avert  the  imputa- 
tion of  bad  faith.     The  rights  of  the  holder  are  to  be  determined  by 
the  simple  test  of  honesty  and  good  faith,  and  not  by  a  speculative 
issue  as  to  his  diUgence  or  negligence.      The   holder's  rights  cannot 
be  defeated  without  proof  of  actual  notice  of  the  defect  in  title  or 
bad  faith  on  his  part  evidenced  by  circumstances.      Though  he  may 
have  been  negligent  in  taking  the  paper,  and  omitted  precautions 
which  a  prudent  man  would  have  taken,  nevertheless,  unless  he  acted 
mala  fide,  his  title,  according  to  settled  doctrine,  will  prevail.     {Aiagee 
v  Badger,  34  N.  Y.  249;  Am.  Ex.  Nat.  Bankv.  N.  Y.  Belting,  etc.,  Co., 
148  N.  Y.  705;  Knox  V.  Eden  Musee  Am.  Co.,  148  N.  Y.  454;  Cana- 
joharie  Nat.  Bank  v.  Diefendorf,  123  N.  Y.  202;  Vosbiirgh  v.  Diefen- 
dorf,  119  N.  Y.  357;  Jarvis  v.  Manhattan  Beach  Co.,  148  N.  Y.  652.) 
Applying  these  rules  to  the  conceded  facts  of  the  case,  it  seems 
to  me   to  be  impossible  to  impute  bad  faith  to  Brooks  in  the  trans- 
action.    He  advanced  a  large  sum  of  money  on  the  faith  of  the 
paper,without  any  actual  knowledge  that  the  relations  of  the  party 
with  whom  he  dealt  to   the   paper   were   different  from  what  they 
appeared  to  be  on  the  face  of  it.    The  question  now  is,  not  what  the 
facts  were,  but  what  they  appeared  to  be,    and   what  he  had  the 
right,  from  the   notes   themselves,  to  assume.      He  had  the  right  to 
assume  that  the  relations  to  the  paper  of  every  party  whose  name 
appeared  on   it  were  precisely  what  they  appeared  to  be.      {Hoge  v. 
Lansing,  35  N.  Y.  136.)     He  had  the  right  to  believe  that  the  notes 
had  been  issued  by  the  defendant  to  Bruen  for  value  in  the  regular 
course  of  business,  and  were  by  him  transferred  to  Frost  &  Son  in 
like  manner.     There   was  nothing  to  suggest  to  him  that  Frost  was 
dealing  with  paper  that  belonged  to  the  railroad  for  his  own  benefit. 
The  appearances  were  that  the  defendant  had  put  the  notes  in  circu- 
lation  by  delivery  to   Bruen,  and   that  they  came  to  Frost's  firm  in 
the  regular  course  of  business  for  value  and  were  then  the  property 
of    the    firm.      It    is    quite    true    that    all    these    appearances    were 
deceptive  and  that  the  actual  facts  were  otherwise.      But  how  was  a 
banker  or  business  man  in  Boston  to  know  or  suspect  that  Bruen  was 
only  the  nominal  payee  and  a  mere  instrument  in  the  transaction  to 
enable  the  president  to  divert  the  paper  to  his  own  use.     The  name 
of  the  party  who  presented  it  and  had  it  in  his  possession  appeared 
on  the  face  of  the  paper  to  have  signed  it  as  president.      The  name 
of  another  officer  of  the  corporation  was  upon  it  also,  attestmg  its 
regularity,  and  everything  was  in  his  handwriting  e.xcept  the  signa- 
ture of  the  president  and  the  indorsement  of  the  payee.     So  far  as 
Brooks  was  concerned,  the  paper  showed  that  it  had  been  issued  to  a 


II.  I.  ^.]  NOTICE:    WHAT   CONSTITUTES.  4II 

Stranger  in  the  regular  course  of  business,  and,  through  his  indorse- 
ment, had  come  to  the  hands  of  a  mercantile  firm  of  which  the  presi- 
dent of  the  corporation  was  a  member.  If  this  were  the  fact,  there 
is  no  doubt  as  to  his  right  to  use  it  in  the  business  of  the  firm.  The 
holder  of  a  note  who  has  no  actual  knowledge  or  notice  of  a  defect 
in  the  title,  or  other  equities  between  the  parties,  when  circum- 
stances come  to  his  knowledge  sufficient  to  put  him  upon  inquiry,  is 
chargeable  with  knowledge  of  all  the  facts  that  such  inquiry  would 
have  revealed.  The  difficulty  in  this  case  is  to  find  the  circumstance 
which  can  be  said  to  be  sufficient  to  put  Brooks  upon  the  inquiry. 
There  was  absolutely  nothing  on  the  face  of  the  paper  except  the 
signature,  as  president,  of  the  party  who  was  dealing  with  it,  and 
that,  we  think,  was  not  sufficient  in  view  of  the  fact  that  the  appear- 
ances were  that  he  was  a  purchaser  from  a  third  party. 

The  principle  that  applies  in  a  case  where  an  officer  of  a  corpora- 
tion makes  the  corporate  obligation  payable  to  himself,  and  then 
attempts  to  deal  with  it  for  his  own  benefit,  does  not  aid  in  solving 
the  question  in  this  case.  When  paper  of  that  character  is  presented 
by  the  officer  or  agent  of  the  corporation,  it  bears  upon  its  face  suffi- 
cient notice  of  the  incapacity  of  the  officer  or  agent  to  issue  it.' 
{Hanover  Bank  v.  Am.  Dock  6"  T.  Co.,  148  N.  Y.  612;  Bank  of  N. 
Y.  V.  Am.  Dock  6-  T.  Co.,  143  N.  Y.  559;  Wilson  v.  M.  E.  R.  Co., 
120  N.  Y.  145;  Gerona  v.  McCormick,  130  X.  Y.  261.)  There  are 
numerous  cases  that  belong  to  that  class  cited  by  the  learned  counsel 
for  the  defendant  on  his  brief.  There  is  a  manifest  distinction 
between  them  and  the  case  at  bar.  Here  the  officer  was  not  dealing 
with  the  corporate  notes  payable  to  himself,  but  with  notes  that  had 
been  regularly  issued,  so  far  as  appeared  from  their  face,  to  a 
stranger  and  by  him  transferred  to  a  firm  of  which  the  officer  was  a 
member,  and  for  which  he  acted  as  agent  in  procuring  the  loan  from 
Brooks  and  pledging  them  as  security.  The  presence  of  Frost's 
name  upon  the  paper,  as  one  of  the  agents  who  issued  it,  was  not 
naturally  or  reasonably  calculated,  under  the  circumstances,  to 
arouse  suspicion  in  the  mind  of  Brooks,  or  to  lead  him  to  believe 
that  the  president  was  attempting  to  defraud  the  corporation  in  dis- 

'  "  Undoubtedly  the  general  rule  is  that  one  who  receives  from  an  officer  of  a 
corporation  the  notes  or  securities  of  such  corporation,  in  payment  of,  or  as 
security  for,  a  personal  debt  of  such  officer,  does  so  at  his  own  peril.  Prima 
facie  the  act  is  unlawful,  and,  unless  actually  authorized,  the  purchaser  will  be 
deemed  to  have  taken  them  with  notice  of  the  rights  of  the  corporation  ((7«rrar^ 
V.  P.  (2t*  C.  R.  R.  Co.,  29  Penn.  St.  154;  Pendleton  v.  Fay,  2  Paige,  202;  Sha7v  v. 
Spencer,  100  Mass.  388)." — Wilson  v.  Metropolitan  El.  Ry.,  120  N.  Y.  145,  150. 
C    itra:  Doe  v.  Northwestern  Coal,  etc.,  Co.,  78  Fed.  Rep.  62,  68.  — Ed. 


412  HOLDER   IN   DUE   COURSE:    REQUISITES.  [ART.  V. 

posing  of  the  notes.  None  of  the  cases  cited  by  the  learned  counsel 
for  the  defendant  sustain  the  proposition  that  such  a  circumstance 
is  sufficient  to  put  the  purchaser  of  negotiable  paper  upon  inquiry  or 
charge  him  with  knowledge  of  the  fact  in  case  he  fails  to  make  it, 
and  there  are  many  cases  that  tend  to  support  the  contrary  view. 
(Am.  Ex.  Nat.  Bank  v.  N.  Y.  B.  &  P.  Co.,  14S  N.  Y.  69S;  Miller 
V.  Consolidation  Bank,  48  Penn.  St.  514;  Walker  v.  Kce,  14  S.  C.  142.) 

It  is  said  that  if  the  plaintiff's  right  to  recover  in  this  case  is 
sanctioned  by  this  court  an  easy  way  will  be  opened  for  the  perpe- 
tration of  frauds  upon  corporations  by  officers  intrusted  with  its 
negotiable  obligations,  and  that  the  device  of  making  the  paper 
payable  to  the  order  of  a  nommal  payee,  interested  or  aiding  in  the 
fraud,  will  be  a  favorite  one  to  accomplish  the  end.  We  must  leave 
all  such  cases  to  be  dealt  with  upon  the  peculiar  facts  and  circum- 
stances as  they  arise.  It  is  more  reasonable  and  just  to  assume  that 
corporations  will  be  able  to  protect  themselves  by  proper  vigilance 
from  the  dishonesty  of  their  own  officers,  than  to  impute  to  parties 
who  have  taken  the  paper  for  value,  ignorant  of  its  origin,  construct- 
ive knowledge  of  the  facts  upon  such  circumstances  as  exist  in  this 
case. 

We  think  that  there  was  nothing  on  the  face  of  the  paper  or  in 
the  facts  shown  to  warrant  the  court  in  holding,  as  matter  of  law,  as 
it  did,  that  the  obligations  were  received  by  Brooks  and  the  advances 
made  on  them  mala  fide.  That  is  the  effect  of  the  ruling  at  the  trial, 
and  the  conclusion  was  not  supported  by  the  facts. 

It  follows  that  the  judgment  must  be  reversed  and  a  new  trial 
granted,  costs  to  abide  the  event. 

Bartlett,  J.,  delivered  a  dissenting  opinion. 

Andrews,  Ch.  J.,  Gray  and  Martin,  J  J.,  concur  with  O'Brien,  J; 
Haight  and  Vann,  JJ.,  concur  with  Bartlett,  J. 

Judgment  reversed. 


§  95  FOX  V.  CITIZENS'  BANK  AND  TRUST  COMPANY.  [§  56] 

37  Southwestern  Reporter  (Tenn.),  1102.  —  1896. 

Bill  to  enjoin  defendants  from  further  prosecuting  suits  on  notes 
executed  by  complainants  to  J.  C.  Anderson,  trustee,  and  indorsed 
by  him  to  defendants.  Decree  for  defendants.  Complainants 
appeal. 

It  is  conceded  that  there  is  a  total  failure  of  consideration,  and 
that  there  would  be  a  perfect  defence  against  Anderson. 


II.  i.c/.j  NOTICE:   WHAT   CONSTITUTES.  413 

Wilson,  J.  (After  stating  the  facts  and  holding  there  was  no 
actual  notice  given  the  bank.)  —  It  is  next  insisted  that  the  notes, 
being  payable  on  their  face  to  Anderson,  trustee,  carried  notice  of 
the  equities  of  complainants.  (Hilliard,  Vend.  §  408,  i  Story,  99, 
§§  399,  400,  and  Covington  v.  Anderson^  16  Lea,  310,  are  cited.) 
Beyond  question,  a  trustee  converting  trust  assets  to  his  own  use  is 
liable  to  the  beneficiaries;  and  equally  liable  is  any  one  purchasing 
from  him  knowing  of  his  fraudulent  intention,  as  having  knowledge 
of  facts  that  would  put  a  reasonably  prudent  man  on  inquiry  as  to 
the  power  and  dishonest  ends  of  the  trustee,  and  which  inquiry,  if 
properly  jprosecuted,  would  discover  the  truth.  This  is  the  extent 
to  which  the  authorities  cited  go.  But  we  are  unable  to  perceive 
the  direct  connection  and  application  of  the  principle  cited  to  the 
facts  of  this  case.  It  is  well  settled  that  the  fact  that  the  considera- 
tion for  which  a  note  is  given  is  stated  in  it  will  not  destroy  its 
negotiability,  unless  the  recital  qualifies  the  promise  to  pay,  or 
renders  it  uncertain  either  as  to  the  time  of  payment  or  the  sum  to 
be  paid.  And  if  the  note  be  received  before  maturity,  and  before  a 
failure  of  consideration,  it  will  be  held  free  from  the  equities, 
although,  from  the  recital,  it  was  known  to  the  indorser  that  the 
consideration  was  future  and  contingent.  {Goodloe  v.  Taylor^  10 
N.  C.  458;  Stevens  v.  Blunt^  7  Mass.  240;  Davis  v.  McCready,  17 
N.  Y.  230:  Bankv.  Cason,  39  La.  Ann.  865,  2  South.  881:  Siege/ v. 
Bank,  131  111.  569,  23  N.  E.  417;  Daniel,  Neg.  Inst.  §§  790-796.) 
In  other  words,  says  the  Louisiana  Annual  (2  South.)  case  and  the 
cases  in  131  111.  569,  and  23  N.  E.  417,  "  it  cannot  affect  the  nego- 
tiability of  a  note  that  its  consideration  is  to  be  hereafter  realized, 
or  that,  from  contingency,  it  may  never  be  enjoyed. 

The  argument  or  proposition  is  advanced  by  implication,  at  least, 
that  the  fact  that  these  notes  are  made  payable  to  Anderson,  trustee, 
impaired  their  negotiability,  or  put  a  transferee  on  notice  of  all 
equities  existing  as  between  the  maker  and  the  trustee.  In  a  con- 
test between  the  beneficiaries  of  these  notes,  assuming  that  Ander- 
son was  not  their  real  owner,  and  the  transferee  of  Anderson,  the 
fact  that  the  notes  appeared  on  their  face  to  be  payable  to  him  as 
trustee  would  put  the  transferee  on  notice,  and  the  claim  of  the 
beneficiaries  would  be  superior  {Cardwell  v.  Cheatham,  2  Head, 
14;  Duncan  v.  Jaudon,  15  Wall.  175;  Shaw  v.  Spencer,  100  Mass. 
389;  Alexander  v.  Alderson,  7  Baxt.  403),  because  the  notes  gave 
direct  information  that  they  were  trust  property,  and  the  direct 
purpose  of  the  transfer  was  to  pay  his  individual  debt.  {Covington 
V.  Anderson,  16  Lea.  310.) 

The  question  as  to  whether  a  note  payable  to  one  as  trustee  is  nego- 


414  HOLDER    IN   DUE   COURSE:    REQUISITES.         [ART.  V. 

liable  is  a  subject  of  dispute  in  the  authorities  or  adjudged  cases. 
In  Maryland  it  seems  to  have  been  held  that  such  a  note  is  not  com- 
mercial paper,  and  that  an  indorsement  of  it  by  the  trustee  transfers 
it,  subject  to  the  trust,  and  that,  after  such  transfer,  it  is  open  to 
the   equitable    defences    between   the    original    parties.      {^Bank   v. 
Lauge,  51  Md.  139.)     But  it  is  holden  in  other  jurisdictions  that  a 
note  to  and  indorsed  by  one  as  trustee  of  a  named  person  does  not 
carry  to  an  innocent  purchaser  any  notice  of  a  restriction  upon  the 
payee's  right  to  transfer  it.   {Downer  v.  Read,  17  Minn.  493  [Gil.  470] ; 
Bush  V.  PcckarcU  3  Har.  [Del.]  3S5 ;  citing  Rand.  Com.  Paper,  §  158, 
p.   242;  Davis  V.  Garr,  6  N.  Y.  124;  s.  c.  55  Am.  Dec.  387,  and  note; 
Pierce  v.  Rohie,  63  Am.  Dec.  614;  Conner  v.  Clark,  73  Am.  Dec.  529.) 
As  a  general  thing,  the  addition  of  the  words  "  trustee  "  and  the 
like  will    be    treated    as    descriptio  personce.     (Authorities   supra;  2 
Am.  and  Eng.  Enc.  Law,  p.  358,  notes  on  pages  358  and  359.)     We 
take  it  that  the  decided  weight  of  authority,  and,  it  seems  to  us,  of 
sound  reason,   supports  the  position  that  the  addition  of  the  word 
*'  trustee  "  to  the  name  of  the  payee  of  a  note  of  itself  does  not 
destroy  its  negotiability.      Under  the  rules  of  the  common  law,  all 
conveyances  by  a  trustee,  whether  to  innocent  purchaser  or  not, 
even  if  made  in  contravention  of  the  trust,  operated  upon  the  legal 
title,  and  vested  it  in  the  grantee.     The  beneficiary  had  to  go  into 
equity,  and  there  he  could  compel  the  grantee  to  respect  the  trust,  as 
the  original  trustee  should  have  done.     {Gale  v.  Mensing,  20  Mo.  461 ; 
s.   c.   64  Am.    Dec.    197,   and   notes;  see,  also,  Tyler  v.  Herring,  67 
Miss.    169,  6  South.  840;  s.  c,  19  Am.  St.  Rep.  263,  and  extended 
note  where  the  subject  with  the  authorities,  is  fully  presented.)    The 
substance  or  real  rule,  in  the  absence   of  a  statute,  in  respect  to 
unauthorized  sales  or  transfers  of  property  by  trustees,  is  that  they 
are  voidable  at  the  election  of  the  parties  in  interest,  and,  until  so 
avoided,  the  grantee  has  all  rights  in  the  property  as  to  third  parties. 
In  this  case  there  is  no  evidence  that  the  notes  did  not  belong  to 
Anderson,  or  that  he  did  not  have  the  right  to  deal  with  them  as  he 
pleased.     The  result  is  that  as  to  these  complainants,  the  defendant 
bank  is  an  innocent  purchaser  of  the  notes,  for  value,  without  notice 
of  any  equities  in  their  favor;  and,  this  being  so,  the  decree  of  the 
chancellor  is  correct,  and  must  be  affirmed,  with  costs.' 

'The  addition  of  the  term  "trustee,"  "agent,"  etc.,  to  the  name  of  the 
payee  is  restrictive  in  effect.  It  merely  gives  notice  of  the  rights  of  the  cestui  or 
the  principal;  it  cannot  logically  be  held  to  give  notice  of  a  defence  in  favor  of 
the  maker.  See  as  to  restrictive  indorsements,  Neg.  Inst.  L.,  §  66  [36].  See 
also  I  27  [8],  subsec.  6;   Davis  v.  Garr,  6  N.  Y.  124,  anh;  p.  261. 

A    qualified    indorsement    is    not    notice    of    any    infirmity    in    the    instru- 


II.  I.  f/.]  NOTICE:   WHAT   CONSTITUTES.  415 

(<f)  Notice  before  full  amount  paid. 

§93  DRESSER  z.  MISSOURI,  ETC.,  COMPANY.         [§54] 

93  United  States,  92.  —  1876. 

Mr.  Justice  Hunt  delivered  the  opinion  of  the  Court. 

This  action  is  brought  upon  three  several  promissory  notes  made 
by  the  Missouri  and  Iowa  Railway  Construction  Company,  dated 
Nov.  I,  1872,  payable  at  two,  three,  and  four  months,  to  the  order  of 
William  Irwin,  for  the  aggregate  amount  of  $10,000 

The  defence  is  made  that  they  were  obtained  by  his  fraudulent 
representations. 

But  a  single  point  requires  discussion.  Conceding  that  the  present 
plaintiff  received  the  notes  before  maturity,  and  that  his  holding  is 
bona  fide.,  the  question  is  as  to  the  amount  of  his  recovery. 

Under  the  ruling  of  the  court  he  recovered  $500.  His  contesta- 
tion is,  that  he  is  entitled  to  recover  the  face  of  the  note,  with  interest. 

After  the  evidence  was  concluded,  the  plaintiff  asked  the  court  to 
charge  the  jury,  that  if  they  believed,  from  the  evidence,  that  the 
plaintiff  purchased  the  notes  in  controversy  of  William  Irwin  for  a 
valuable  consideration,  on  the  ist  of  November,  1S72,  and  paid  $500, 
part  of  the  consideration,  on  21st  day  of  January,  1873,  before  any 
notice  of  any  fraud  in  the  contract,  he  was  entitled  to  recover  the 
whole  amount  of  the  notes;  and  the  court  refused  this  instruction. 
But  the  court  charged  the  jury,  — 

"  That,  in  the  first  place,  the  jury  must  find  that  there  was  fraud 
in  the  inception  of  the  notes  as  alleged;  and  that  if  the  defendants 
failed  to  satisfy  the  jury  of  that  fact,  the  whole  defence  fails. 

"  That  if  the  fact  of  fraud  be  established,  and  the  jury  find  from 
the  evidence  that  the  plaintiff  paid  $500  upon  the  notes  without 
notice  of  the  fraud,  and  that  after  receiving  notice  of  the  fraud  the 
plaintiff  paid  the  balance  due  upon  the  notes,  he  is  protected  only 
pro  tanto ;  that  is,  to  the  amount  paid  before  he  received  notice." 

It  does  not  appear  that,  upon  the  purchase  of  the  notes  in  suit, 
the  plaintiff  gave  his  note   or  other  obligation   which   might  by  its 

ment.  Lomaxw.  Picot,  2  Rand.  (Va.)  247,  ante,  p.  367.  The  death  of  the  maker, 
known  to  the  buyer,  does  not  deprive  the  buyer  of  the  position  of  a  holder 
in  due  course.      Clark  v.  Thayer,  105  Mass.  216. 

The  doctrine  of  notice  by  lis  pendens  has  no  application  to  negotiable  paper. 
County  of  Warren  v.  Marey,  97  U.  S.  106.  Nor  should  the  maker,  before  matu- 
rity, be  liable  to  garnishment  at  the  suit  of  a  creditor  of  the  payee,  for  a  pur- 
chaser from  the  payee  in  due  course  should  be  protected,  i  Daniel  on  Neg. 
Inst.,  §  8oofl.  —  Ed. 


4l6  HOLDER   IN   DUE   COURSE:    REQUISITES.  [ART.  V. 

transfer  subject  him  to  liability.  His  agreement  seems  to  have  been 
an  oral  one  merely,  —  to  pay  the  amount  agreed  upon,  as  should  be 
required;  and  he  had  paid  $500,  and  no  more,  when  notice  of  the 
fraud  was  brought  home  to  him. 

The  argument  of  the  plaintiff  in  error  is  that  negotiable  paper  may 
be  sold  for  such  sum  as  the  parties  may  agree  upon,  and  that, 
whether  such  sum  is  large  or  small,  the  title  to  the  entire  paper 
passes  to  the  purchaser.  This  is  true;  and  if  the  plaintiff  had 
bought  the  notes  in  suit  for  $500,  before  maturity  and  without 
notice  of  any  defence,  and  paid  that  sum,  or  given  his  negotiable 
note  therefor,  the  authorities  cited  show  that  the  whole  interest  in 
the  notes  would  have  passed  to  him,  and  he  could  have  recovered 
the  full  amount  due  upon  them.  {Fowler  v.  Strickland,  107  Mass. 
552;  Park  Bank  v.  Watson,  42  N.  Y.  490;  Bank  of  Michigan  v. 
Green,  33  Iowa,  140.)  The  present  case  differs  from  the  cases 
referred  to  in  this  respect.  The  notes  in  question  were  purchased 
upon  an  unexecuted  contract,  upon  which  $500  only  had  been  paid 
when  notice  of  the  fraud  and  a  prohibition  to  pay  was  received  by 
the  purchaser.  The  residue  of  the  contract  on  the  part  of  the  pur- 
chaser is  unperformed,  and  honesty  and  fair  dealing  require  that 
he  should  not  perform  it;  certainly,  that  he  should  not  be  per- 
mitted, by  performing  it,  to  obtain  from  the  defendants  money 
which  they  ought  not  to  pay.  As  to  what  he  pays  after  notice,  he 
is  not  a  purchaser  in  good  faith.  He  then  pays  with  knowledge  of 
the  fraud,  to  which  he  becomes  a  consenting  party.  One  who  pays 
with  knowledge  of  a  fraud  is  in  no  better  position  than  if  he  had  not 
paid  at  all.  He  has  no  greater  equity,  and  receives  no  greater  pro- 
tection. Such  is  the  rule  as  to  contracts  generally.  In  the  case  of 
the  sale  of  real  estate  for  a  sum  payable  in  instalments,  and  circum- 
stances occur  showing  the  existence  of  fraud,  or  that  it  would  be 
inequitable  to  take  the  title,  the  purchaser  can  recover  back  the 
sum  paid  before  notice  of  the  fraud,  but  not  that  paid  afterwards. 
{Barnard  v.  Campbell,  53  N.  Y.  73;  Leivis  v.  Bradford,  10  Watts, 
82;  Juvenal  v.  Jackson,  2   Harris,  529;   Id.  430;    Youst  v.  Alar  tin,  3 

S.  &  R.  423,  430-) 

In  Weaver  v.  Barden  (49  N.  Y.  291),  the  court  use  this  language: 
"  To  entitle  a  purchaser  to  the  protection  of  a  court  of  equity,  as 
against  a  legal  title  or  a  prior  equity,  he  must  not  only  be  a  pur- 
chaser without  notice,  but  he  must  be  a  purchaser  for  a  valuable 
consideration;  that  is,  for  value  paid.  Where  a  man  purchases  an 
estate,  pays  part  and  gives  bonds  for  the  residue,  notice  of  an 
equitable  incumbrance  before  payment  of  the  money,  though  after 
criving  the  bond,  is  sufficient.      {Touville  v.   Naish,  3  P.  Wms.  306; 


IT.  2.]  TITLE   FROM    HOLDER   IN    DUE   COURSE.  417 

Stofj  V.  Lord  Windsor,  2  Atk.  630.)  Mere  security  to  pay  the  pur- 
chase price  is  not  a  purchase  for  a  valuable  consideration.  {Harding- 
ham  V.  Mckolls,  3  Atk.  304;  Maundrell  v.  Maundrell,  10  Ves.  246, 
271;  Jackson  V.  Cadwell,  i  Cowen,  622;  Jewell  v.  Palmer,  7  J.  C. 
65.)  The  decisions  are  placed  upon  the  ground,  according  to  Lord 
Hardwicke,  that  if  the  money  is  not  actually  paid  the  purchaser  is 
not  hurt.     He  can  be  released  from  his  bond  in  equity." 

The  plaintiff  here  occupies  the  same  position  as  the  bona  fide  pur- 
chaser of  the  first  of  a  series  of  notes,  of  which,  after  notice  of  a 
fraud,  he  purchases  the  rest  of  the  series.  He  is  protected  so  far 
as  his  good  faith  covers  the  purchase,  and  no  farther. 

Upon  receiving  notice  of  the  fraud,  his  duty  was  to  refuse  further 
payment;  and  the  facts  before  us  required  such  refusal  by  him. 
(Authorities  supra.)  Crandell  v.  Vickery  (45  Barb.  156),  is  in 
point.     .     .     . 

To  the  same  purport  in  principle,  although  upon  facts  somewhat 
different,  are  the  cases  of  Garland  v.  The  Salem  Bank  (9  Mass.  408) ; 
The  Fulton  Bank  v.  The  Phoenix  Bank  (i  Hall,  562);  and  White  v. 
Springfield  Bank  (3  Sandf.  S.  C.  227). 

The  cases  are  numerous  that  where  a  bona  fide  \vo\d,tx  takes  a  note 
misappropriated,  fraudulently  obtained,  or  without  consideration,  as 
collateral  security,  he  holds  for  the  amount  advanced  upon  it,  and 
for  that  amount  only.  {Williams  v.  Smith,  2  Hill,  301;  Allaire  v. 
Hartshorn,  i  Zabr.  663.) 

The  case  before  us  is  governed  by  the  rule  that  the  portion  of  an 
unperformed  contract  which  is  completed  after  notice  of  a  fraud  is 
not  within  the  principle  which  protects  a  bona  fide  purchaser. 

No  respectable  authority  has  been  cited  to  us  sustaining  a  contrary 
position,  nor  have  we  been  able  to  find  any.  The  judgment  below 
is  based  upon  authority,  and  upon  the  soundest  principles  of  honesty 
and  fair  dealing.     It  has  our  concurrence,  and  is  affirmed. 


2.  Holder  Deriving  Title  from  Holder  in  Due  Course. 

§  97  SIMON  V.   MERRITT.  [§  58] 

33  Iowa,  537.  —  1871. 

Action  by  the  holder  of  a  promissory  note  against  the  maker. 
There  was  a  verdict  and  judgment  for  defendant.     Plaintiff  appeals. 

Beck,  Ch.  J.  .  .  .  Among  other  instructions  the  court  gave 
the  jury  the  following:  "If  you  find  from  the  evidence  that  the 
note  in  question  was  obtained  of  the  makers  by  fraud  and  deception, 
and  if  you  further  find  that  the  plaintiff,  Simon,  knew  of  such  fraud 

NEGOT.   INSTRUMENTS  —  27. 


41 8  HOLDER   IN   DUE   COURSE.  [ART.  V. 

and  deception,  or  if  he  had  reason  to  know  or  believe  that  said  note 
was  fraudulently  obtained  of  the  maker,  and  that  it  is  void,  and  if, 
because  of  such  knowledge  or  belief,  he  refused  to  receive  or  pur- 
chase it  of  Leggett  until  an  indemnifying  bond  was  executed  to  him 
by  Leggett,  then  the  law  of  the  case  is  with  the  defendant,  and  if  you 
so  find  then  your  verdict  should  be  for  defendant."  And  the  instruc- 
tion directed  the  jury  that  if  plaintiff,  "  in  good  faith,  for  a 
valuable  consideration,  obtained  the  note  in  the  ordinary  course  of 
business,  before  maturity,  without  notice  of  fraud,  or  without  having 
reason  to  know  or  believe  that  the  note  was  obtained  by  fraud 
of  the  maker,"  they  should  find  for  plaintiff. 

These  instructions  are  erroneous.  They  leave  out  of  view  the 
well-settled  doctrine  that  if  Leggett,  the  transferer  of  plaintiff,  was 
such  an  innocent  and  bona  fide  holder  of  the  paper,  that  in  his  hands 
it  could  have  been  enforced  against  defendant,  plaintiff,  although 
he  may  have  taken  the  note  charged  with  notice  of  its  infirmities, 
may  recover  in  this  action.  If  Leggett  so  held  the  note,  his  title 
and  rights  thereto  were  such  that  they  could  not  have  been  defeated 
by  defendant.  In  the  transfer,  the  title  and  rights  held  by  him 
passed  to  plaintiff.  The  notice  which  plaintiff  may  have  had  of  the 
fraud  in  the  original  transaction  does  not  defeat  the  rights  he 
acquired  by  the  transfer. 

One  reason  of  the  rule  is  obvious.  The  maker  of  the  note  would 
be  liable  to  the  transferer;  his  condition  is  made  no  harder  by  the 
note  coming  into  the  hands  of  one  having  notice  of  its  infirmities. 
We  do  not  understand  that  there  is  any  conflict  in  the  authorities 
upon  this  point.  {Hoskell  &=  Gervey  v.  Whitmore^  19  Me.  102;  Smith 
V.  His  cock,  14  Id.  449;  Prentice  &'  Messenger  v.  Zane,  2  Gratt.  262  ; 
Boyd  \.  McCann,  10  Md.  118;  Howell  \.  Crane,  12  La.  An.  126;  see 
authorities  cited  in  Story  on  Prom.  Notes,  §  191.) 

The  instructions  above  set  out,  being  in  conflict  with  this  doctrine, 
ought  not  to  have  been  given.  For  this  reason  the  judgment  of  the 
District  Court  is  reversed.' 


§  97  PROUTY  V.   ROBERTS.  [§  58] 

6  Gushing  (Mass.),  19.  —  1850. 
Action  by  indorsee  against  maker.     Defendant  offered  to  show 
that  the  first  indorsee  procured  the  note  from  the  payee  by  fraud, 
and  that  plaintiff  took  it  with  notice  of  this  fact  and  for  an  inade- 
quate consideration.      Evidence  excluded.     Verdict  for  plaintiff. 


'  See  §  52  [26],  ante,  and  cases.  —  Ed. 


II.  3-]  AMOUNT   OF   RECOVERY.  4^9 

Bv  THE  Court.  —  The  directions  we  think  were  right;  the  plaintiff 
proved  a  legal  title  to  the  note,  and  the  facts  proposed  to  be  proved 
by  the  defendant  could  afford  him  no  ground  of  defence.  It  was 
no  fraud  upon  the  defendant;  he  was  called  upon  to  pay  only  what 
he  had  undertaken  to  pay;  and  payment  to  the  plaintiff  would  be  a 
good  discharge.     (^K?iights  v.  Putnam,  3  Pick.  184.) 

Judgment  on  the  verdict. 


3.  Right  of  Holder  in  Due  Course  to  Recover  Full  Amount. 
§  96  BISSELL  V.   DICKERSON.  [§  57] 

64  Connecticut,  61.  —  1894. 

Baldwin,  J.  (After  disposing  of  another  matter.)  —  The  plain- 
tiff's appeal  is  based  on  the  instruction  given  to  the  jury,  that  in 
the  action  against  the  maker  of  a  negotiable  accommodation 
note  by  an  indorsee,  who  took  it  in  good  faith  for  value  before 
maturity,  and  without  notice  of  any  infirmity,  if  the  defendant 
proves  that  it  was  obtained  from  him  by  the  payee  and  indorser  by 
fraud,  the  rule  of  damages  is  the  amount  paid  by  the  plaintiff. 
A  note  given  for  the  accommodation  of  the  payee,  which  he  has 
thus  negotiated  to  a  bona  fide  purchaser,  stands,  as  between  the 
holder  and  maker,  on  the  same  footing  as  if  it  were  business 
paper.'  The  jury  should  therefore  have  been  instructed  that  the 
rule  of  damages  under  the  circumstances  stated  in  the  charge,  was 
the  face  of  the  note,  with  interest  from  its  maturity.  {Bcldcn  v. 
Lamb  17  Conn.  441,  453;  First  Ecclesiastical  Society  v.  Loomis,  42 
Conn.  570,  574;  Rowland  v.  Fowler,  47  Conn.  347;  Cronnvell  v- 
County  of  Sac,  96  U.  S.  51,  60.) 

>  Business  paper  (as  distinguished  from  accommodation  paper),  may  be  pur- 
chased for  any  price  without  involving  any  question  of  usury,  for  the  transac- 
tion is  a  sale  and  purchase  and  not  a  loan.  Cram  v.  Hendricks,  7  Wend.  (N.  Y.) 
569;  Corning  v.  Pond,  29  Hun  (N.  Y.)  129.  But  a  transfer  of  accommodation 
paper  by  the  accommodated  party  to  one  knowing  the  facts,  is  a  loan  and  not  a 
purchase  and  sale,  and  if  it  be  at  a  rate  of  discount  greater  than  that  allowed  by 
the  usury  laws,  is  usurious.  Ibid;  1  Daniel  on  Neg.  Inst.,  §§  750-753-  Many 
cases  hold  the  same  as  to  accommodation  paper  even  though  the  buyer  does 
not  know  it  to  be  accommodation  paper;   but  this  view  has  been  criticised.     Ilnd. 

There  has  been  great  conflict  among  the  authorities  as  to  the  amount  a  holder 
in  due  course  may  recover  from  an  accommodation  party  or  a  party  whose 
assent  to  the  paper  has  been  procured  by  fraud,  i  Daniel  on  Neg.  Inst. 
5^^  754-758-  The  Neg  Inst.  Law,  §  96  [57],  settles  the  law  in  conformity  to  the 
rule  of  the  Supreme  Court  of  the  United  States.  Cromwell  v.  County  of  Sac, 
96  U.  S.  60;  Ji.  Co.  v.  Schutte,  103  U.  S.  118.  —Ed. 


420  HOLDER   IN   DUE   COURSE.  [ART.  V. 

There  is  error,  and  a  new  trial  is  ordered  upon  the  plaintiff's 
appeal,  in  case  one  should  not  be  granted  by  the  City  Court,  on  the 
ground  that  the  verdict  was  against  the  evidence. 


§  96       NATIONAL  BANK  OF  MICHIGAN  v.  GREEN.     [§  57] 

33  Iowa,  140.  —  1871. 

Action  by  holder  against  indorser.  The  answer  set  up  a  sale  for 
less  than  the  face  value.  Demurrer  to  this  defence  overruled. 
Judgment  for  defendant. 

Day,  Ch.  J.  —  In  objection  to  the  second  count '  it  is  claimed  that 
the  holder  of  negotiable  paper  is  entitled  to  recover  of  the  indorser 
the  whole  amount  thereof  without  reference  to  the  amount  paid 
therefor.  Upon  this  question  the  decisions  are  not  in  har- 
mony. .  .  .  Without  attempting  a  review  of  the  authorities 
bearing  upon  this  branch  of  the  demurrer,  we  deem  it  sufficient  to 
state  as  our  opinion  that  the  indorsee  in  good  faith  of  a  promissory 
note,  is  entitled  to  recover  of  the  indorser  the  amount  of  the  note. 

This  view  has  the  unqualified  indorsement  of  Mr.  Parsons.  (See 
2  Parsons,  Notes  and  Bills,  428.  Also,  Durant  v.  Banta,  3  Dutch. 
623,  635.)  It  follows  that  the  demurrer  to  the  second  count  should 
have  been  sustained. 

Reversed." 


§  96  MERRITT  V.  BENTON.  [§  57] 

10  Wendell,  116.  —  1833. 

Action  against  indorser.  Judgment  for  amount  of  note  and 
notary's  fees.     Defendant  moves  for  new  trial. 

B\  the  Court,  Savage,  C.  J.  — The  remaining  question  is,  whether 
the  fees  of  protest  were  properly  chargeable  to  the  defendant.'  As 
to  this  we  have  not  been  referred  to  any  decided  case,  and  we 
understand  that  the  practice  at  the  circuit  is  not  uniform,  though 
the  fees  of  protest  are  generally  allowed.  It  is  an  expense  to  which 
the   holder  of  a   note  is  subjected  by  reason  of  the  default  of  the 

'  Only  so  much  of  the  opinion  is  given  as  relates  to  this.  —  Ed. 

*  The  amount  of  recovery  against  the  indorser  has  been  a  matter  of  great 
contention,  i  Daniel  on  Neg.  Inst.,  §§  766-768.  It  is  now  settled  by  the  Neg. 
Inst.  Law,  §  96  [57],  in  conformity  with  the  view  of  the  principal  case.  —  Ed. 

2  Only  so  much  of  the  opinion  as  relates  to  this  question  is  here  given.  —  Ed. 


II.  3-]  AMOUNT   OF    RECOVERY.  421 

indorser,  whose  duty  it  is  to  pay  the  note  at  maturity,  and  it  is  right, 
therefore,  that  the  holder  should  recover  it.  It  may  fairly  be  con- 
sidered as  a  charge  incident  upon  the  indorser's  failure  to  perform 
his  contract,  and  should  be  allowed  to  the  plaintiffs  in  the  assess- 
ment of  damages. 

New  trial  denied.' 


§  96  SIMPSON  V.  GRIFFIN.  [§  57] 

9  Johnson  (N.  Y.)  131.  —  1812. 

In  error,  on  certiorari   from  a  justice's  court. 

Griffin  sued  Simpson  before  the  justice,  and  declared  for  money 
had  and  received  to  his  use,  and  for  money  lent.  The  defendant 
pleaded  non  assumpsit.  The  plaintiff  proved,  that  he  had  been  sued 
as  indorser  of  a  note  drawn  by  the  defendant,  and  had  been  obliged 
to  pay,  besides  the  amount  of  the  note,  nineteen  dollars,  costs  of 
suit.  The  taxed  bill  was  produced  to  the  justice,  who  gave  judg- 
ment for  the  plaintiff,  for  the  amount. 

Per  Curiam.  — If  the  indorser  of  a  note  be  duly  fixed,  he  ought 
to  pay  it,  without  waiting  to  be  sued,  but  if  he  finds  it  more  con- 
venient to  delay  taking  up  the  note,  until  he  is  prosecuted  to  judg- 
ment and  execution,  the  drawer  ought  not  to  pay  for  that 
convenience.  It  is  his  own  fault  or  misfortune  that  subjects  him  to 
costs,  and  he  cannot  resort  to  the  drawer  for  indemnity  against 
those  costs.  The  mere  fact  of  drawing  the  note  does  not  imply  a 
promise  to  save  the  payee  harmless  from  all  costs  and  charges  that 
he  may  be  subjected  to,  as  indorser.  There  must  be  a  special 
promise  to  save  harmless  before  the  payee  can  call  upon  the  drawer 
for  costs  accrued  by  the  default  of  the  payee  himself.  As  payee,  he 
can  only  look  to  the  drawer  for  the  amount  of  the  note.  The  judg- 
ment must,  therefore,  be  reversed. 

Judgment  reversed.' 

'  For  recovery  of  "  re-exchange  "  see  Bills  of  Exchange  Act,  §  57,  subsec.  2; 
2  Daniel  on  Neg.  Inst.,  §§  1444-1447;  Bank  of  U.  S.  v.  U.  S.,  2  How.  (U.  S.) 
737. —  Ed. 

'^Accord:  March  v.  Barnet,  114  Calif.  375.  "A  surety,  including  a  drawer  or 
indorser,  may  recover,  in  an  action  against  his  principal,  .  .  .  his  reason- 
able costs  and  other  expenses,  incurred  necessarily  and  in  good  faith,  in  the 
prosecution  or  defence,  by  the  express  or  implied  consent  of  the  principal  .  .  . 
of  an  action  or  special  proceeding,  relating  to  the  demand  secured."  N.  Y. 
Code  Civ.  Proc,  ^  1916.  —  Ed. 


422  HOLDER   IN   DUE    COURSE.  [ART.  V. 

4.   Burden  of  Proof. 

§  98  TATAM  V.   HASLAR.  [§  59] 

L.  R.  23  Queen's  Bench  Div.,  345.  —  1S89. 

Motion  for  a  new  trial. 

The  plaintiff  sued  upon  a  bill  of  exchange  for  500/.,  drawn  by  the 
defendant  Johnstone,  and  accepted  by  the  defendant  Haslar,  paya- 
ble to  the  order  of  Johnstone,  and  indorsed  by  him  to  the  plaintiff. 
Judgment  had  been  signed  against  Johnstone,  but  Haslar,  having 
obtained  leave  to  defend,  pleaded  that  he  had  accepted  the  bill  and 
handed  it  to  one  Leslie  for  the  purpose  of  getting  it  discounted  for 
him;  that  there  was  no  consideration  for  his  acceptance,  and  that 
Leslie  fraudulently  handed  over  the  bill  to  Johnstone,  who  fraudu- 
lently indorsed  it  to  the  plaintiff,  who  took  it  without  consideration 
and  with  notice  of  the  fraud. 

At  the  trial,  before  Field,  J.,  and  a  jury,  the  defendant  gave  evi- 
dence of  the  fraudulent  negotiation  of  the  bill,  which  the  judge  held 
to  be  sufficient  to  throw  upon  the  plaintiff  the  onus  of  proving  that 
he  gave  value  in  good  faith.  The  plaintiff  gave  evidence,  and 
proved  that  he  had  given  450/.  for  the  bill,  and  also  alleged  that 
he  had  bought  the  bill  honestly,  without  notice  of  the  fraud. 

The  learned  judge,  in  his  summing-up,  told  the  jury  that  the  onus 
was  on  the  plaintiff  to  satisfy  them  that  he  really  gave  value  for  the 
bill,  but  on  the  defendant  to  satisfy  them  that  the  plaintiff  took  the 
bill  under  such  circumstances  as  to  invalidate  his  title,  because  he 
had,  or  ought  to  have  had,  notice  of  the  fraud.  The  learned  judge 
also  told  the  jury  that  the  plaintiff  was  a  bona  Jide  holder  for  value, 
if  he  really  and  truly  advanced  the  value  alleged  by  him. 

The  jury  found  a  verdict  for  the  defendant,  and  the  plaintiff  moved 
that  judgment  might  be  entered  for  him,  or  a  new  trial  had,  on  the 
ground  that  the  judge  misdirected  the  jury  in  telling  them  that 
there  was  evidence  of  circumstances  which  should  have  put  the 
plaintiff  upon  inquiry,  and  that  the  verdict  was  against  the  weight 
of  evidence. 

Denman.  J. — The  summing-up  of  the  learned  judge  has  been 
read  through  and  fully  commented  upon,  and  I  have  come  to  the 
conclusion  that,  upon  the  true  construction  of  the  Bills  of  E.xchange 
Act,  1882  (45  and  46  Vict.  c.  61),  he  put  the  case  too  favorably  for 
the  plaintiff.  Inasmuch  as  the  argument  in  this  case  has  turned  to 
a  great  extent  upon  what  is  the  present  state  of  the  law  under  the  Act, 
I  think  that  we  must  express  our  opinion  upon  it.  The  first  clause 
with    which   we   must   deal   is   s.    30,   sub-s.  2,  which  provides  that 


II.  4  ]  BURDEN   OF   PROOF.  423 

"  every  holder  of  a  bill  \%  prima  facie  deemed  to  be  a  holder  in  due 
course;  but  if  in  an  action  on  a  bill  it  is  admitted  or  proved  that  the 
acceptance,  issue,  or  subsequent  negotiation  of  the  bill  is  affected 
with  fraud  .  .  .  the  burden  of  proof  is  shifted,  unless  and  until 
the  holder  proves  that,  subsequent  to  the  alleged  fraud  or  illegality, 
value  has  in  good  faith  been  given  for  the  bill."  Now  the  learned 
judge  told  the  jury  that,  if  money  had  really  and  in  fact  been  given 
for  the  bill,  value  had  in  good  faith  been  given.  I  have  never  so  read 
this  section  of  the  Act;  and  I  think  that  the  attention  of  the  learned 
judge  could  not  have  been  called  to  the  other  clauses  of  the  Act. 
Giving  "  value  in  good  faith  "  must  mean  something  more  than  the 
mere  actual  and  real  passing  of  money  or  other  value,  and  this 
appears  clearly  when  the  other  clauses  of  the  Act  are  looked  at. 
A  "  holder  in  due  course  "  is,  by  s.  29,  sub-s.  i,  defined  to  be  a  per- 
son who  has  taken  a  bill  in  good  faith  and  for  value  and  without 
notice  of  any  defect  in  the  title  of  the  person  who  negotiated  it. 
Then  s.  30,  sub-s.  2,  says,  in  effect,  that,  if  fraud  in  the  inception  or 
negotiation  of  a  bill  is  proved  or  admitted,  the  holder  must  prove  that 
he  is  a  holder  in  due  course  as  defined  by  s.29,  sub-s.  i.  Again,  s.  90 
says  that  "  a  thing  is  deemed  to  be  done  in  good  faith  .  .  .  when 
it  is  in  fact  done  honestly,  whether  it  is  done  negligently  or  not." 
This  clause  is  obviously  founded  upon  the  distinction,  which  is 
pointed  out  by  Lord  Blackburn  in  Jones  v.  Gordon  (2  App.  Cas.  616, 
at  p.  629),  between  honest  blundering  or  carelessness  and  a  dis- 
honest refraining  from  inquiry.  Applying  that  constrution  to  the 
words  "  value  given  in  good  faith  "  at  the  end  of  s.  30,  sub-s.  2,  it 
appears  to  me  that  those  words  mean  value  given  honestly  and  with- 
out any  notice  of  the  fraud,  in  the  sense  explained  by  Lord  Black- 
burn, and  not  merely  the  actual  giving  of  value. 

The  words  of  s.  30,  sub-s.  2,  "if  it  is  admitted  or  proved,"  mean 
no  more  than  that  some  evidence  of  circumstances  in  the  nature  of 
fraud  must  be  given  sufficient  to  be  left  to  the  jury.  That  was  the 
old  law,  as  stated  in  Hall  v.  Featherstone  (3  H.  &  N.  284),  which  has 
not,  I  think,  been  altered  by  this  Act.  When,  therefore,  some  suffi- 
cient evidence  of  fraud  has  been  given,  as  in  this  case,  the  onus  is 
on  the  plaintiff  to  prove  both  that  he  gave  value  and  that  he  had  no 
notice  of  the  fraud  in  the  sense  explained  by  Lord  Blackburn  in 
Jones  v.   Gordon,  supra. 

In  this  case  there  was  evidence  of  fraud  which  could  not  have 
been  withdrawn  from  the  jury,  and  their  verdict  on  that  point  can- 
not be  set  aside  as  against  the  weight  of  evidence.  The  onus  of 
proving  that  he  had  no  notice  being  upon  the  plaintiff,  it  was  essen- 
tially a  matter  for  the  jury  to  say  whether  he  had  satisfied  them  on 


424  HOLDER   IN   DUE    COURSE.  [ART.  V. 

that  point,  and  I  think  that  even  had  the  onus  been  upon  the  defend- 
ant there  was  evidence  upon  which  the  jury  were  entitled  to  find  a 
verdict  for  him.     The  verdict,  therefore,  cannot  be  disturbed. 

Charles,  J.  —  It  is  impossible  to  say  that  there  was  not  abundant 
evidence  of  the  fraud,  practiced  upon  the  plaintiff,  to  support  the 
verdict.  Then  arises  the  important  question  in  the  case  whether 
there  were  circumstances  in  the  transaction  which  ought  to  have  led 
the  plaintiff  to  make  inquiries,  and  he  wilfully  abstained  from  inquiry. 

At  the  time  of  the  passing  of  the  Bills  of  Exchange  Act,  1882,  it 
was  uncertain  how  much  the  plaintiff  had  to  prove  in  cases  of  this 
kind  when  evidence  of  fraud  had  been  given.  Lord  Blackburn,  in 
Jones  V.  Gordon  (2  App.  Cas.  616,  at  p.  628),  says,  "  the  language  of 
the  quotation  from  Mr.  Baron  Parke  would  seem  to  show  that  the 
onus  as  to  both  is  shifted,  but  I  do  not  think  that  has  ever  been 
decided,  nor  do  I  think  it  is  necessary  to  decide  it  in  the  present 
case."  The  learned  judge  who  tried  this  case  took  the  view  that 
the  onus  was  shifted  only  to  the  extent  of  making  the  plaintiff  prove 
that  value  was  in  fact  given,  not  that  it  was  also  given  bona  fide. 
Upon  the  construction  of  the  Act,  I  respectfully  differ  from  him.  The 
plaintiff  was  bound  to  satisfy  the  jury  that  he  gave  value,  and  that 
he  gave  it  in  good  faith.  The  Act  has  settled  the  law  in  accordance 
with  the  opinion  expressed  by  Parke,  B. 

I  agree  with  my  brother  Denman  as  to  the  meaning  of  the  words 
"admitted  or  proved  "  in  the  earlier  part  of  s.  30,  sub-s.  2.  The 
latter  part  of  that  section  says  that  the  holder  must  prove  that  value 
was  in  good  faith  given  for  the  bill.  Referring  back  to  s.  29,  sub-s. 
I,  a  holder  in  due  course  is  defined  to  be  a  person  who  has  taken  a 
bill  in  good  faith  and  for  value  and  without  notice  of  any  defect  in 
the  title  of  the  person  who  negotiated  it.  Therefore  a  holder  is  by 
s.  30,  sub-s.  2,  deemed  to  be  a  holder  in  due  course  until  fraud  is 
proved,  but  in  that  case  he  must  prove  that  he  is  a  holder  in  due 
course  as  defined  in  s.  29,  sub-s.  i.  "  Good  faith  "  is  by  s.  90, 
defined  to  be  the  doing  of  a  thing  honestly.  When,  therefore,  fraud 
has  been  proved  the  holder  must  prove  that  he  gave  value  honestly 
without  notice  of  the  fraud.  The  jury  have  found  against  the  plain- 
tiff, and  the  verdict  must  stand. 

Motion  dismissed.' 


'  The  holder,  when  fraud  or  illegality  is  shown  by  way  of  defence,  must 
assume  the  burden  of  showing  "  not  only  that  he  bought  before  maturity  and 
paid  value,  but  also  the  circumstances  under  which  he  acquired  the  paper,  with 
the  view  of  enabling  the  jury  to  determine  whether  he  acted  in  good  faith  or 
not."  Canajoharie  Nat.  B' k  v.  Diefcndorf,  123  N.  Y.  igi;  also  Vosbtivirh  v. 
Diefendorf,  119  N.  Y.  357.     But  not  when  the  defence  is  want  or  failure  of  con- 


III.]  DEFENCES.  425 

§  98  MARKET  AND  FULTON  NAT.  BANKt;.  SARGENT.  [§59] 

85  Maine,  349.  — 1893. 

[Reported  herein  at  p.  29 1.] 


III.  Defences  to  negotiable  instpuments. 

§  94  CLARK  V.  PEASE.  [§  55J 

41  New  Hampshire,  414.  —  i860. 

Action  bj'  indorsee  against  maker  on  a  promissory  note.  Defences : 
duress  by  imprisonment;  illegality  because  given  to  compromise  a 
crime.     The  defendant  offered  evidence  to  substantiate  the  defences. 

The  plaintiff  excepted  to  this  evidence,  as  no  defence  against  the 
indorsee,  without  proof  that  he  was  not  the  bona  Jide  holder  of  the 
note.  But  the  court  ruled  that  if  the  note  was  obtained  by  duress, 
it  was  void  in  the  hands  of  an  innocent  indorsee,  and  thereupon  the 
plaintiff,  admitting  for  the  purposes  of  this  trial  that  the  defendant's 
witnesses  would  testify  to  the  facts  stated,  a  verdict  for  the  defend- 
ant was  taken  by  consent,  subject  to  the  opinion  of  the  court;  and 
the  questions  thus  raised  were  reserved,  and  assigned  to  the  deter- 
mination of  the  whole  court. 

Sargent,  J.  — That  the  case  presented  is  clearly  one  of  duress, 
there  can  be  no  question.  The  abuse  of  any  process,  either  civil  or 
criminal,  to  compel  a  party,  by  imprisonment,  to  do  any  act  against 
his  will  except  to  pay  the  debt  for  which  he  is  arrested,  is  entirely 
illegal,  and  the  act  may  be  avoided  on  the  ground  of  duress.  {-Rich- 
ardson V.  Duncan,  3  N.  H.  508;  Severa?ice  v.  Kimball,  8  N.  H.  386; 
Shaw  V.  Spoonei-,  9  N.  H.  197;  Burnham  v.  Spooner,  10  N.  H.  523; 
Beck  V.  Blanchard,  22  N.  H.  303.)  Here  the  arrest  was  without  any 
warrant  or  lawful  authority.  Such  duress  is  a  perfect  defence,  upon 
all  the  authorities,  to  an  action  between  the  original  parties. 

The  note  in  this  case  was  not  only  void  as  between  the  original 
parties,  on  the  ground  of  duress,  but  was  given  to  compromise  a 
charge  of  crime,  and  was  wholly  illegal  upon  that  ground.  (Plunier 
V.  Smith,  5  N.  H.  553.) 

But  the  principal  question  raised  here  by  the  ruling  of  the  court 
is,  whether  such  a  note  is  absolutely  void  in  the  hands  of  any  holder; 
and  if  not,  then  another  question  arises  upon  the  exception  which 
was  taken  by  the  plaintiff,  which  is  this:     After  an  indorsee  has 

sideration.     Holden  v.  Phcenix  Rattan   Co.,  168  Mass.  570;    Galvin  v.  Meridian  N. 
B.,  I2Q  Ind.  439.     See  Clark  v.  Pease,  infra.  —  Ed. 


426  RIGHTS   OF   HOLDER.  [ART.  V. 

made  out  a  p7-ima  facie  case  by  proving  the  indorsement,  etc.,  and 
the  defendant  has  shown  that  the  note  was  obtained  from  him  by 
duress,  upon  whom  rests  the  burden  of  proof  ?  Must  the  defendant 
prove  that  the  plaintiff  was  not  the  bona  fide  holder,  and  that  he  did 
not  pay  a  valid  consideration  for  it,  as  the  plaintiff  claimed  ?  or,  the 
duress  being  proved,  does  that  throw  the  burden  of  proof  upon  the 
plaintiff,  to  prove  how  he  came  by  the  note,  and  the  consideration 
he  paid,  etc.,  as  the  defendant  claims  ?  We  will  examine  these  ques- 
tions in  the  order  in  which  we  have  stated  them. 

I.  Is  this  note  absolutely  void  in  the  hands  of  any  holder,  however 
innocent,  who  has  paid  a  valid  consideration  for  it  before  it  was  due? 

[The  court  here  discusses  the  grounds  for  avoiding  contracts 
generally.] 

Now  bills  and  notes  stand  upon  the  same  foundation  as  all  other 
contracts  do,  in  all  the  above  respects,  so  long  as  they  remain  in 
the  hands  of  the  original  payee.  But  bills  and  notes  have  another 
attribute,  which  other  contracts  ordinarily  do  not  possess,  —  that 
is,  negotiability.  Where  a  bill  or  note  has  been  negotiated,  and 
passed  into  the  hands  of  a  bona  fide  holder  before  it  is  due,  and  for 
a  valuable  consideration,  in  such  case  the  holder  acquires  rights 
which  did  not  belong  to  the  payee.  He  stands  in  a  different  relation 
to  the  promisor.  These  additional  rights  and  privileges  have  been 
conferred  upon  such  holder  by  law,  for  good  and  sufficient  reasons, 
too  well  known  and  understood  to  need  to  be  stated,  but  which  are 
incident  to,  and  dependent  upon,  the  attribute  of  negotiability, 
which  these  instruments  possess. 

And  it  may  be  laid  down  as  the  general  rule,  as  the  general  princi- 
ple applying  to  this  class  of  cases,  that  such  a  note,  thus  negotiated 
and  in  the  hands  of  such  a  holder,  is  not  liable  to  any  defence  which 
the  maker  had  as  against  the  original  payee.  To  this  general  rule 
there  are  some  exceptions,'  among  which  are  — 

I.  When  a  statute  not  only  prohibits  the  making  of  a  contract, 
but  provides  that  the  same  shall  be  void  to  all  intents  and  purposes; 
or  where  the  law  provides  that  any  contract  made  or  securities  given 
upon  any  illegal  consideration  shall  be  absolutely  void,  then  the 
note  which  embodies  such  contract,  or  is  based  upon  such  considera- 
tion, is  held  void  everywhere  and  in  the  hands  of  every  holder. °     In 

'  These  exceptions  constitute  what  are  known  as  real  or  absolute  defences. 
See  Bigelow,  Bills,  Notes  and  Checks  (Students'  ed.),  pp.  174-205.  —  Ed. 

*  "The  authorities  justify  the  statement  that  a  defendant  may  insist  upon  the 
illegality  of  the  contract  or  consideration,  notwithstanding  the  note  is  in  the 
hands  of  an  innocent  holder  for  value,  in  all  those  cases  in  which  he  can  point  to 
an  express  declaration  of  the  legislature  that  the  illegality  insisted  upon  shall 


III.]  DEFENCES.  427 

England,  and  in  most  of  the  United  States,  there  are  or  have  been 
laws  against  usury,  which  not  only,  by  a  general  prohibition  of 
usury,  made  that  an  illegal  consideration  for  a  note,  but  also  pro- 
vided that  all  bills  or  notes  founded  upon  such  a  consideration  should 
be  absolutely  void.  Such,  however,  is  not  the  law  in  this  State  on 
that  subject,  and  it  is  believed  that  we  have  no  statutes  w-ith  similar 
provisions.  Hence,  here  usury  ma}^  be  a  good  defence  to  a  note  as 
against  the  original  party,  but  not  as  against  an  innocent  indorsee, 
for  value,  etc' 

2.  When  the  note  is  a  forgery,  it  is  void  everywhere.* 

3.  When  the  maker  belongs  to  a  class  of  persons  who  are  ordinarily, 
and  as  a  general  rule,  on  grounds  of  public  policy,  held  incompetent 
to  contract  at  all,  such  as  infants,'  married  women,''  alien  enemies,* 
and  insane  persons,"  including  spenthrifts  and  others  under  guardian- 
ship,' who  have  been  by  some  statute  declared  incompetent  to  con- 
tract. 

make  the  security,  whether  contract,  bill  or  note,  void.  But  unless  the  legisla- 
ture  has  so  declared,  then,  no  matter  how  illegal  or  immoral  the  consideration 
may  be,  a  commercial  note  in  the  hands  of  an  innocent  holder  for  value  will  be 
held  valid  and  enforceable."  Sondheim  v.  Gilbert,  117  Ind.  71,  77,  1888.  See  also 
Union  Nat.  Bank  v.  Brown,  (Ky.  1897)  41  S.  W.  Rep.  273.  —  Ed. 

'  For  usury  laws  in  the  United  States,  see  Stimson,  Am.  St.  Law,  §§  4830- 
4837;  3  Parsons  on  Contracts  (8th  ed.),  p.  *I53.  In  New  York,  the  legal  rate  of 
interest  is  six  per  cent  (L.  1879,  c.  538).  All  bonds,  bills,  notes,  etc.,  whereby 
there  shall  be  reserved  or  taken,  or  secured,  or  agreed  to  be  reserv-ed  or  taken, 
any  greater  sum,  or  greater  value  for  the  loan  or  forbearance  of  any  money, 
goods,  or  other  thing  in  action,  than  is  above  prescribed,  shall  be  void;  and  a 
court  of  chancery  may  on  satisfactory  proof  declare  the  same  to  be  void,  enjoin 
any  prosecution  thereon,  and  order  the  same  to  be  surrendered  and  canceled. 
(L.  1837,  c.  430.)  But  banks  and  bankers  taking  usury  forfeit  only  the  interest 
when  payment  is  postponed,  or  twice  the  amount  if  taken  in  advance,  whether 
national  banks  (U.  S.  Rev.  St.,  §  5198),  or  State  banks  (L.  1892,  c.  689.  §  55); 
and  on  call  loans  of  not  less  than  five  thousand  dollars  secured  by  negotiable 
collateral  or  bills  of  lading,  warehouse  receipts,  certificates  of  stock,  etc.,  a  bank 
or  banker  may  take  any  sum  agreed  upon  in  writing.  (L.  1892,  c.  68g,  §  56.) 
No  corporation  shall  interpose  the  defence  of  usury  in  any  action.  (L.  1850, 
c.  172.)  Special  rates  are  provided  for  loans  by  pawnbrokers.  (L.  1S83,  c.  339, 
§  7;  L.  1895,  c.  706,  §3.) 

Many  States  provide  that  bills,  notes  end  other  securities  given  for  gaming 
debts  or  knowingly  lent  for  gambling  purposes,  shall  be  void.  Stimson,  Am. 
St.  Law,  §  4132  (c);  i  N.  Y.  Rev.  St.  663,  §  16;  lb.  665,  §  24.  See  also  N.  Y. 
Neg.  Inst.  L.,  §§  330,  331.  —  Ed. 

"  See  Neg.  Inst.  L.,  §  42  [23];  ante,  pp.  322-324.  —  Ed. 

^  I  Daniel  on  Neg.  Inst.,  §§  223-238.  —  Ed. 

*  Ibid.,  §§  239-258.  —  Ed. 
0  Ibid.,  §§  216-222.  —  Ed. 

*  Ibid.,  §§  209-213;  Hosier  v.  Beard,  54  Oh.  St.  398.  —  Ed. 
'  Daniel,  §g  259-260.  —  Ed. 


428  RIGHTS   OF   HOLDER.  [ART.  V. 

4.  Notes  signed  by  agents  without  authority.' 

In  none  of  these  case  (except  the  first,  which,  as  we  have  seen, 
does  not  apply  in  this  State),  is  a  note  valid  in  the  hands  of  anyone; 
and  the  party  who  discounts  such  paper  is  bound  to  inquire,  at  his 
peril,  whether  the  note  offered  to  him  is  signed  by  a  party  capable  and 
competent  in  law  to  bind  himself,  or  by  an  agent  duly  authorized  to 
bind  his  principal.  Besides  this,  he  is  bound  to  inquire  whether  the 
party  from  whom  he  receives  it  is  competent  to  make  such  transfer 
in  his  own  right,  or  is  authorized  to  do  it  for  his  principal,  for  whom 
he  assumes  to  act. 

If  there  is  a  failure  in  either  of  these  points  of  capacity  or  authority, 
it  will  not  avail  the  party  that  he  is  a.  do/ia  Jide  holder,  for  value, 
without  notice.  He  must  look  to  his  indorser  if  he  has  one,  and  if 
he  has  not  he  must  suffer  loss. 

5.  Another  case  might  be  mentioned,  which  has  been  made  an 
exception  to  the  general  rule  above  stated  by  express  provisions  of 
the  statute,  —  as  where  a  note  is  attached  by  the  trustee  process. 
There,  by  operation  of  the  statute,  the  maker  of  a  note  may  have  a 
perfect  defence  against  an  indorsee,  for  value,  without  notice,  and 
before  due.^  So  notes  discharged  by  operation  of  insolvent  laws 
might  afterwards  be  transferred,  by  possibility,  so  as  to  form 
another  exception,  where  the  indorsee,  holding  the  note  bona  fide, 
etc.,  might  be  met  with  a  perfect  defence  on  the  part  of  the  maker. 
But  these  last  cases  throw  no  light  upon  the  question  we  are  con- 
sidering. 

These  are  the  principal,  perhaps  all  the  exceptions  to  the  general 
rule  stated  above,  that  no  defence  is  available  against  an  innocent 
indorsee,  for  value  paid  before  due.^  But  where  the  contract  was 
illegal,  being  prohibited  by  law,  or  the  consideration  was  illegal,  as 
usury,  wagers,  compounding  a  felony,  restraint  of  trade  or  of  mar- 
riage, etc.,  or  where  there  was  a  want  or  failure  of  consideration, 
and  even   where  the  note  has  been  paid,  —  all  these  defences,^  and 

'  See  Neg.  Inst.  L.,  §§  37-40  [18-21];  ante,  pp.  311-321.  — Ed. 

^  See  I  Daniel  on  Neg.  Inst.,  §  800^.  —  Ed. 

3  To  these  should  be  added  the  extinguishment  of  the  instrument  by  cancella- 
tion or  alteration.  See  Neg.  Inst.  L.,  §§  204-206  [123-125], /oj/.  .  The  case  of 
want  of  delivery,  or  want  of  delivery  as  and  for  a  negotiable  instrument,  calls  for 
special  comment  and  may  or  may  not  be  an  absolute  defence  according  as  the 
maker  is  or  is  not  estopped  to  set  up  the  defence.  See  i  Daniel  on  Neg.  Inst., 
§1  847-853.     See  post,  pp.  431-445-  —  Ed. 

*■  These  defences  are  known  as  personal,  conditional,  or  "  equitable  "  defences. 
See  Bigelow,  Bills,  Notes  and  Checks  (Students'  ed.),  pp.  172,  206.  These 
defences  are  fraud,  duress,  illegality,  want  or  failure  of  consideration,  release 
or  payment,  discharge  of  party  primarily  liable,  etc.     Whether  a  right  of  set-off 


III.]  DEFENCES.  429 

many  more,  cannot  be  made  against  the  note  in  the  hands  of  such  a 
holder.  And  the  question  here  raised  I3,  \/hether,  in  case  of  duress, 
or  fraud,  where  there  is  mala  fides,  but  it  is  all  on  one  side,  and  the 
other  party  to  the  note  has  been  induced  to  sign  it  by  force  or  by 
fraud,  and  is  in  every  respect  an  innocent  party,  such  defence  shall 
avail  him  as  against  such  a  holder,  for  value,  etc.  who  seeks  to  col- 
lect it. 

And  we  think  such  a  defence  cannot  avail  the  maker  against  such 
an  indorsee  of  the  note.     The  authorities  favor  this  view. 

Suppose  an  individual,  thei.,  v/cre  about  to  purchase  a  note  paya- 
ble to  bearer,  before  it  was  due,  and  pay  a  fair  equivalent  for  it,  with 
a  view  of  collecting  it  of  the  maker,  and  where  he  is  to  have  no 
ind.jrser  to  rely  upon,  —  what  v/ould  be  his  duty  in  order  to  proceed 
safely?  First,  he  must  assure  himself  of  the  genuineness  of  the 
signature,  or,  if  it  purported  to  be  signed  by  an  agent,  he  must 
assur:  himself  that  the  agent  was  duly  authorized  to  bind  his  princi- 
pal in  that  particular;  secondly,  he  must  make  such  inquiries,  which, 
ordinarily,  he  may  easily  do,  as  to  ascertain  that  the  signer  is  not 
an  infant,  a  married  woman,  an  alien  enemy,  an  insane  person,  etc.,  — 
that  he  does  not  belong  to  a  class  of  persons  who  are  always  pre- 
sumed by  the  law  to  be  incompetent  to  contract;  and  thirdly,  he 
might  need,  for  his  own  safety,  to  inquire  whether  the  signer  of  the 
note  had  been  trusteed,  or  whether  any  other  special  statute  could 
affect  his  claim  to  it.  When  he  has  satisfied  himself  upon  these 
points,  if  he  learns  of  no  other  defects,  and  the  signer  is  of  sufiicient 
ability  to  respond,  he  may  purchase;  and  there  is  generally  very 
little  trouble  in  ascertaining  these  facts.  They  are  usually  matters 
of  public  notoriety,  about  which  there  can  be  little  room  for  mistake. 

But,  suppose  that  after  being  satisfied  upon  all  these  points,  and 
having  purchased  the  note,  it, should  prove  that  it  was  an  illegal 
contract,  or  was  for  an  illegal  consideration, —  who  shall  suffer?  —  the 
maker  or  the  indorsee?  This  is  settled  on  the  best  of  authority. 
The  original  parties  stood  upon  equal  ground,  both  being  in  fault, 
and  could  neither  of  them  enforce  the  contract;  yet  neither  shall  be 
allowed  to  take  advantage  of  his  own  wrong  as  against  an  innocent 
indorsee. 

And  suppose  it  should  turn  out  that  his  note  was  obtained  of  the 
maker  by  fraud  or  by  duress,  a  case  in  which  the  maker  was  in  no 
fault,  —  what  rule  shall  be  applied  here?  —  the  long  established  one, 
that  where  one  of  two  innocent  persons  must  suffer,  the  loss  should 

existing  at  the  time  of  the  transfer  is  an  "  equity  "  is  in  dispute.  2  Daniel  on 
Neg  Inst.,  §§  1435^-1437.  In  New  York  it  is  an  equity  in  case  of  the  transfer 
of  an  overdue  note.     N.  Y.  Code  Civ.  Proc,  §  502.  —  Ed. 


430  RIGHTS   OF   HOLDER.  [ART.  V. 

fall  upon  him  who  has  suffered  a  negotiable  security,  with  his  name 
attached  to  it,  to  get  into  circulation,  and  thereby  mislead  the 
indorsee.  Such  rules,  and  such  an  application  of  them,  are  neces- 
sary to  give  security  to  negotiable  paper. 

The  exception  to  the  ruling  of  the  court  upon  this  point  must  be 
sustained;  but  we  shall  find  that  the  numerous  authorities  which  bear 
upon  the  next  question  to  be  considered  have  also  a  direct  bearing 
upon  this  point. 

§  98  [59]-  II.  Next  let  us  inquire,  upon  whom  is  the  burden  of 
proof,  after  duress,  or  fraud,  or  illegality  of  consideration  is  proved? 
Must  the  defendant  not  only  prove  that  he  had  a  perfect  defence  to 
the  note  originally,  but  also  show  that  the  indorsee  had  notice  of 
the  defect,  or  that  he  paid  no  consideration  for  it,  or  that  he  is  not 
in  Eome  way  the  bona  fide  holder  of  the  note?  Or  must  the  plaintiff, 
after  such  defence  to  the  original  contract  is  proved,  assume  the 
burden  of  proving  that  he  is  a  bona  fide  holder,  for  a  valuable  con- 
sideration, without  notice  of  any  defect,  and  that  it  came  seasonably 
into  his  hands? 

[After  discussing  various  authorities.] 

The  same  doctrines  very  generally  prevail  in  this  country,  wherever 
the  subject  has  received  judicial  consideration.      [Muni-oe  v.  Cooper, 

5  Pick.  412;    Woodhul  V.  Holmes,    10  Johns.    ^^31;    Vallettw  Parker, 

6  Wend.  615;  Small  v.  Smith,  i  Den.  583;  Worcester  Co.  Bank  v.  D. 
cr  M.  Bank,  10  Cush.  488;  IVycr  v.  V.  e^  J/.  Bank,  11  Cush.  52; 
Rockwell  V.  Charles,  2  Hill,  499;  Bissell  v.  Morgan,  11  Cush.  198; 
Crosby  v.  Grant,  36  N.  H.  273.)  So  in  Smith  on  Cont.  (3d  Am.  ed. 
277),  in  a  note  by  Rawle,  it  is  said  that  in  New  York  it  has  been 
held  that,  as  soon  as  the  defendant  shows  there  has  been  usury 
between  the  prior  parties,  he  casts  on  the  plaintiff  the  burden  of 
proving  that  he  is  a  holder  for  value, — as  is  the  case  in  every 
instance  where  fraud,  duress,  or  illegality  is  shown  between  the  prior 
parties. 

These  authorities  would  seem  conclusive,  that  the  plaintiff's 
exception,  —  that  the  evidence  offered  would  have  been  no  defence 
unless  it  were  proved  that  he  was  not  the  bona  fide  holder,  —  must 
be  overruled.  When  the  defendant  had  proved  the  duress,  he  had 
made  a  good  defence  as  against  the  original  party;  and  because  of 
the  legal  presumption  that  in  such  cases  the  payee,  being  guilty  of 
such  illegality,  would  dispose  of  the  note  and  place  it  in  the  hands 
of  some  other  person  to  sue  upon  it  [Bailey  v.  Bidwell,  ante),  he 
had  thereby  cast  a  suspicion  on  the  plaintiff's  title,  which  threw  the 
burden  upon  him  of  showing  affirmatively  that  he  was  3.  bona  fide 


III.]  DEFENCES.  43 1 

holder  for  value.  Nor  can  we  see  that  the  fact  that  this  evidence 
was  offered  under  the  general  issue  alters  the  position  of  the  parties 
or  the  state  of  the  case. 

These  authorities  also  bear  directly  upon  the  first  point  taken  by 
the  defendant,  that  duress  is  a  defence  against  any  holder,  however 
innocent  he  may  be,  and  however  valuable  a  consideration  he  may 
have  paid  for  the  note;  and  if  other  authorities  on  this  point  were 
needed,  they  are  not  wanting.  In  Poiversv.  Ball  (27  Vt.  662),  Red- 
field,  C.  J.,  says,  "  Illegality,  duress,  fraud,  and  want  or  failure  of 
consideration,  are  no  defence  as  against  a  bona  fide  holder  for  value. ' ' 
(See,  also,  St.  Albans  Bank  v.  Dillon,  30  Vt.  122;  Ellicott  v.  Martin, 
6  Md.  509;  Minellv.  Reed,  26  Ala.  730;  Norris  v.  Langley,  19  N.  H. 
423;  Knight  y.  Pugh,  4  Watts  &  Serg.  445.) 

The  verdict  must  be  set  aside,  and  a  new  trial  granted. 


§  94  WALKER   V.   EBERT.  [§  55] 

29  Wisconsin,  194.  —  1871. 

Action  against  maker  of  a  promissory  note,  by  a  holder  who 
claims  to  have  purchased  it  for  full  value,  before  maturity.  Defence: 
that  defendant  is  a  German  unable  to  read  and  write  the  English 
language;  that  the  payees  fraudulently  induced  him  to  sign  an  instru- 
ment represented  to  him  to  be  a  contract  of  agency,  but  which  in 
fact  was  the  promissory  note  in  question.  Evidence  to  establish 
this  defence  ruled  out,  and  judgment  given  for  plaintiff.  Defendant 
appeals. 

Dixon,  C.  J.  — The  defendant,  having  properly  alleged  the  same 
facts  in  his  answer,  offered  evidence  and  proposed  to  prove  by  him- 
self as  a  witness  on  the  stand,  that  at  the  time  he  signed  the  sup- 
posed note  in  suit,  he  was  unable  to  read  or  write  the  English 
language;  that  when  he  signed  the  same,  it  was  represented  to  him 
as,  and  he  believed  it  was,  a  certain  contract  of  an  entirely  different 
character,  which  contract  he  also  offered  to  produce  in  evidence; 
that  the  contract  offered  to  be  produced  was  a  contract  appointing 
him,  defendant,  agent  to  sell  a  certain  patent  right,  and  no  other  or 
different  contract,  and  not  the  note  in  question;  and  that  the  sup- 
posed note  was  never  delivered  by  the  defendant  to  any  one.  It  was 
at  the  same  time  stated  that  the  defendant  did  not  claim  to  prove 
that  the  plaintiff  did  not  purchase  the  supposed  note  before  maturity 
and  for  value.  To  this  evidence  the  plaintiff  objected,  and  the 
objection  was  sustained  by  the  court,  and  the  evidence  excluded,  to 
which  the  defendant  excepted;  and  this  presents  the  only  question. 


432  RIGHTS   OF   HOLDER.  [ART.  V. 

We  think  it  was  error  to  reject  the  testimony.  The  two  cases  cited 
by  counsel  for  the  defendant  {^Foster  v.  McKinnon,  L.  R.  4  C.  P.  704, 
and  Whitney  v.  Snyder,  2  Lansing,  477)  are  very  clear  and  explicit 
upon  the  point,  and  demonstrate,  as  it  seems  to  us,  beyond  any 
rational  doubt,  the  invalidity  of  such  paper,  even  in  the  hands  of  a 
holder  for  value,  before  maturity,  without  notice.  The  party  whose 
signature  to  such  paper  is  obtained  by  fraud  as  to  the  character  of 
the  paper  itself,  who  is  ignorant  of  such  character,  and  has  no  inten- 
tion of  signing  it,  and  who  is  guilty  of  no  negligence  in  affixing  his 
signature,  or  in  not  ascertaining  the  character  of  the  instrument,  is 
no  more  bound  by  it  than  if  it  were  a  total  forgery,  the  signature 
included. 

The  reasoning  of  the  above  cases  is  entirely  satisfactory  and  con- 
clusive upon  this  point.  The  inquiry  in  such  cases  goes  back  of  all 
questions  of  negotiability,  or  of  the  transfer  of  the  supposed  paper  to 
a  purchaser  for  value,  before  maturity  and  without  notice.  It  chal- 
lenges the  origin  or  existence  of  the  paper  itself;  and  the  proposition 
is,  to  show  that  it  is  not  in  law  or  in  fact  what  it  purports  to  be, 
namely,  the  promissory  note  of  the  supposed  maker.  For  the  pur- 
pose of  setting  on  foot  or  pursuing  this  inquiry,  it  is  immaterial  that 
the  supposed  instrument  is  negotiable  in  form,  or  that  it  may  have 
passed  to  the  hands  of  a  bona  fide  holder  for  value.  Negotiability 
in  such  cases  presupposes  the  existence  of  the  instrument  as  having 
been  made  by  the  party  whose  name  is  subscribed;  for,  until  it  has 
been  so  made  and  has  such  actual  legal  existence,  it  is  absurd  to 
talk  about  a  negotiation,  or  transfer,  or  bona  fide  holder  of  it,  within 
the  meaning  of  the  law  merchant.  That  which,  in  contemplation  of 
law,  never  existed  as  a  negotiable  instrument,  cannot  be  held  to  be 
such;  and  to  say  that  it  is,  and  has  the  qualities  of  negotiability, 
because  it  assumes  the  form  of  that  kind  of  paper,  and  thus  to  shut 
out  all  inquiry  into  its  existence,  or  whether  it  is  really  and  truly 
what  it  purports  to  be,  \%  petitio  principii  —  begging  the  question 
altogether.  It  is,  to  use  a  homely  phrase,  putting  the  cart  before 
the  horse,  and  reversing  the  true  order  of  reasoning,  or  rather  pre- 
venting all  correct  reasoning  and  investigation,  by  assuming  the 
truth  of  the  conclusion,  and  so  precluding  any  inquiry  mto  the  ante- 
cedent fact  or  premise,  which  is  the  first  point  to  be  inquired  of  and 
ascertained.  For  the  purposes  of  this  first  inquiry,  which  must  be 
always  open  when  the  objection  is  raised,  it  is  immaterial  what  may 
be  the  nature  of  the  supposed  instrument,  whether  negotiable  or  not, 
or  whether  transferred  or  negotiated,  or  to  whom  or  m  what  man- 
ner, or  for  what  consideration  or  value  paid  by  the  holder.  It  must 
always  be  competent  for  the  party  proposed  to  be  charged  upon  any 


III.]  DEFENCES.  433 

written  instrument,  to  show  that  it  is  not  his  instrument  or  obliga- 
tion. The  principle  is  the  same  as  where  instruments  are  made  by 
persons  having  no  capacity  to  make  binding  contracts;  as,  by  infants, 
married  women,  or  insane  persons;  or  where  they  are  void  for  other 
cause,  as,  for  usury;  or  where  they  are  executed  as  by  an  agent,  but 
without  authority  to  bind  the  supposed  principal.  In  these  and  all 
like  cases,  no  additional  validity  is  given  to  the  instruments  by  putting 
them  in  the  form  of  negotiable  paper.  (See  Veeder  v.  Toii<n  of 
Litfia,  19  Wis.  297  to  299,  and  authorities  there  cited.  See  also 
Thojnas  v.   IVatkius,  16  Wis.  549.) 

And  identical  in  principle,  also,  are  those  cases  under  the  registry 
laws,  where  the  bona  fide  purchaser  for  value  of  land  has  been  held 
not  to  be  protected  when  the  recorded  deed  under  which  he  pur- 
chased and  claims,  turns  out  to  have  been  procured  by  fraud  as  to 
the  signature,  or  purloined  or  stolen,  or  was  a  forgery,  and  the  like. 
(See  Everts  v.  Agnes,  4  Wis.  343,  and  the  remarks  of  this  court,  pp. 
351-353,  inclusive.) 

In  the  case  first  above  cited  [Foster  v.  McKinno?i),  the  defendant 
was  induced  to  put  his  name  upon  the  back  of  a  bill  of  exchange  by 
the  fraudulent  representation  of  the  acceptor,  that  he  was  signing  a 
guaranty.  In  an  action  against  him  as  indorser,  at  the  suit  of  a 
bona  fide  holder  ior  \sl\\ig^,  the  Lord  Chief  Justice,  Boville,  directed 
the  jury  that,  "  If  the  defendant's  signature  to  tne  document  was 
obtained  upon  a  fraudulent  representation  that  it  was  a  guaranty, 
and  the  defendant  signed  it  without  knowing  that  it  was  a  bill,  and 
under  the  belief  that  it  was  a  guaranty,  and  if  he  was  not  guilty  of 
any  negligence  in  so  signing  the  paper,  he  was  entitled  to  the  ver- 
dict; "  and  this  direction  was  held  proper.  In  delivering  the  judg- 
ment of  the  court  upon  a  rule  nisi  for  a  new  trial,  Byles,  J.,  said:  — 

"  The  case  presented  by  the  defendant  is,  that  he  never  made  the 
contract  declared  on;  that  he  never  saw  the  face  of  the  bill;  that  the 
purport  of  the  contract  was  fraudulently  misdescribed  to  him;  that 
when  he  signed  one  thing,  he  was  told  and  believed  he  was  signing 
another  and  an  entirely  different  thing;  and  that  his  mind  never  went 
with  his  act.  It  seems  plain  on  principle  and  on  authority,  that  if 
a  blind  man,  or  a  man  who  cannot  read,  or  for  some  reason  (not 
implying  negligence),  forbears  to  read,  has  a  written  contract  falsely 
read  over  to  him,  the  reader  misreading  to  such  a  degree  that  the 
written  contract  is  of  a  nature  altogether  different  from  the  contract 
pretended  to  be  read  from  the  paper,  which  the  blind  or  illiterate 
man  afterwards  signs,  then,  at  least  if  there  be  no  negligence,  the 
signature  so  obtained  is  of  no  force;  and  it  is  invalid,  not  merely  on 
the  ground  of  fraud,  where  fraud  exists,  but  on  the  ground  that  the 
mind  of  the  signer  did  not  accompany  the  signature;  in  other  words, 
that  he  never  intended  to  sign,  and  therefore,  in  contemplation  of 
law,  never  did  sign  the  contract  to  which  his  name  is  appended." 

NEGOT.   INSTRUMENTS  — 28. 


434  RIGHTS   OF   HOLDER.  [ART.  V. 

And  again,  after  remarking  the  distinction  between  the  case  under 
consideration  and  those  where  a  party  has  written  his  name  upon  a 
blank  piece  of  paper,  intending  that  it  should  afterwards  be  filled  up, 
and  it  is  improperly  so  filled,  or  for  a  larger  sum,  or  where  he  has 
written  his  name  upon  the  back  or  across  the  back  or  across  the  face 
of  a  blank  bill  stamp,  as  indorser  or  acceptor,  and  that  has  been 
fraudulently  or  improperly  filled,  or  in  short,  where,  under  any  cir- 
cumstances, the  party  has  voluntarily  affixed  his  signature  to  com- 
mercial paper,  knowing  what  he  7vas  doing,  and  intending  the  same  to 
be  put  in  circulation  as  a  negotiable  security,  and  after  also  showing 
that  in  all  such  cases  the  party  so  signing  will  be  liable  for  the  full 
amount  of  the  note  or  bill,  when  it  has  once  passed  into  the  hands 
of  an  innocent  indorsee  or  holder,  for  value  before  maturity,  and 
that  such  is  the  limit  of  the  protection  afforded  to  such  an  indorsee 
or  holder,  the  learned  judge  proceeded:  — 

"  But,  in  the  case  now  under  consideration,  the  defendant,  accord- 
ing to  the  evidence,  if  believed,  and  the  finding  of  the  jury,  never 
intended  to  indorse  a  bill  of  exchange  at  all,  but  intended  to  sign  a 
contract  of  an  entirely  different  nature.  It  was  not  his  design,  and, 
if  he  were  guilty  of  no  negligence,  it  was  not  even  his  fault,  that  the 
instrument  he  signed  turned  out  to  be  a  bill  of  exchange.  It  was 
as  if  he  had  written  his  name  on  a  sheet  of  paper  for  the  purpose  of 
franking  a  letter,  or  in  a  lady's  album,  or  an  order  for  admission  to 
Temple  Church,  or  on  the  fly-leaf  of  a  book,  and  there  had  already 
been,  without  his  knowledge,  a  bill  of  exchange  or  a  promissory 
note  payable  to  order  inscribed  on  tl.e  other  side  of  the  paper.  To 
make  the  case  clearer,  suppose  the  bill  or  note  on  the  other  side  of 
the  paper  in  each  of  these  cases  to  be  written  at  a  time  subsequent 
to  the  signature,  then  the  fraudulent  misapplication  of  that  genuine 
signature  to  a  different  purpose  would  have  been  a  counterfeit  altera- 
tion of  a  writing  with  intent  to  defraud,  and  would  therefore  have 
amounted  to  a  forgery.  In  that  case  the  signer  would  not  have  been 
bound  by  his  signature,  for  two  reasons  —  first,  that  he  never  in 
fact  signed  the  writing  declared  on,  and,  secondly,  that  he  never 
intended  to  sign  any  such  contract." 

"In  the  present  case,  the  first  reason  does  not  apply,  but  the 
second  does  apply.  The  defendant  never  intended  to  sign  that  con- 
tract, or  any  such  contract.  He  never  intended  to  put  his  name  to 
any  instrument  that  then  was  or  thereafter  might  become  negotiable. 
He  was  deceived,  not  merely  as  to  the  legal  effect,  but  as  to  the 
actual  contents  of  the  instrument." 

The  other  case  first  above  cited  (JVhitney  v.  Snyder),  was  in  all 
respects  like  the  present,  a  suit  upon  a  promissory  note  by  the  pur- 
chaser before  maturity,  for  value,  against  the  maker;  and  the  facts 
offered  to  be  proved  in  defence  were  the  same  as  here;  and  it  was 
held  that  the  evidence  should  have  been  admitted. 

In  Nance  v.  Larcy  (5  Ala.  370),  it  was  held  that  where  one  writes 


III.]  DEFENCES.  435 

his  name  on  a  blank  piece  of  paper,  of  which  another  takes  posses- 
sion without  authority  therefor^  and  writes  a  promissory  note  above 
the  signature,  which  he  negotiates  to  a  third  person,  who  is  ignorant 
of  the  circumstances,  the  former  is  not  liable  as  the  maker  of  the 
note  to  the  holder.  In  that  case  the  note  was  written  over  the 
signature  by  one  Langford,  and  by  him  negotiated  to  the  plaintiff  in 
the  action,  who  sued  the  defendant  as  maker.     Collier,  C.  J.,  said: — 

"  The  making  of  the  note  by  Langford  was  not  a  mere  fraud  upon 
the  defendant;  it  was  something  more.  It  was  quite  as  much  a 
forgery  as  if  he  had  found  the  blank,  or  purloined  it  from  the 
defendant's  possession.  If  a  recovery  were  allowed  upon  such  a 
state  of  facts,  then  every  one  who  ever  indulges  in  the  idle  habit  of 
writing  his  name  for  mere  pastime,  or  leaves  sufficient  space  between 
a  title  and  his  subscription,  might  be  made  a  bankrupt  by  having 
promises  to  pay  money  written  over  his  signature.  Such  a  decision 
would  be  alarming  to  the  community,  has  no  warrant  in  law,  and 
cannot  receive  our  sanction." 

And  in  Putnam  v.  Sullivan  (4  Mass.  54),  Chief  Justice  Parsons 
said:  — 

"  The  counsel  for  the  defendants  agree  that,  generally,  an  indorse- 
ment obtained  by  fraud  will  hold  the  indorsers  according  to  the 
terms  of  it,  but  they  make  a  distinction  between  the  cases  where 
the  indorser,  through  fraudulent  pretenses,  has  been  induced  to 
indorse  the  note  he  is  called  on  to  pay,  and  where  he  never  intended 
to  indorse  a  note  of  that  description,  hut  a  different  note  and  for  a  different 
purpose.  Perhaps  there  may  be  cases  in  which  this  distinction  ought 
to  prevail.  As,  if  a  blind  man  had  a  note  falsely  and  fraudulently  read 
to  him,  and  he  indorsed  it,  supposing  it  to  be  the  note  read  to  him.  But 
we  are  satisfied  that  an  indorser  cannot  avail  himself  of  this  dis- 
tinction, but  in  cases  where  he  is  not  chargeable  with  any  laches  or 
neglect,  or  misplaced  confidence  in  others."  (See  also  i  Parsons  on 
Notes  and  Bills,  no  to  114,  and  cases  cited  in  notes.) 

The  judgment  below  must  be  reversed,  and  a  venire  de  novo 
awarded. 

By  the  Court.  —  It  is  so  ordered.' 


§  94  CHAPMAN   V.   ROSE.  [§  55] 

56  New  York,  137.  —  1874. 

This  action  was  upon  a  promissory  note  of  $270,  signed  by  de- 
fendant, payable  to  E.  A.  Miller  or  bearer. 

'Accord:  Gihbsv.  Linabitry,  22  Mich.  479;  De  Camp  v.  liamma,  2q  Oh.  St. 
467;  Puffer  V.  Smith,  57  111.  527;  Green  v.  Wilkie,  (Iowa)  66  N.  W.  Rep.  1046. 
See  Caulkins  v.  Winder,  29  Iowa,  495,  ante,  p.  2S9.  So  also  the  want  of  delivery 
of  an  incomplete  instrument  is  a  real  or  absolute  defence.  Neg.  Inst.  L.,  §  34 
[15].     See  cases  and  notes,  ante,  pp.  275-283.  —  Eu. 


436  RIGHTS   OF   HOLDER.  [ART.  V. 

Defendant  entered  into  a  contract  with  Miller  to  act  as  agent  for 
the  sale  of  a  patent  hay  fork  and  pulley.  A  contract  was  filled  out 
by  Miller  and  signed  by  both;  also  an  order,  which  was  signed  by 
defendant,  for  one  of  the  hay  forks  and  two  pulleys^  for  which,  by 
the  order,  defendant  agreed  to  pay  nine  dollars.  These  were 
delivered  to  defendant.  Another  paper  was  then  presented  to 
defendant  for  his  signature,  which  Miller  represented  to  be  but  a 
duplicate  of  the  order.  Defendant  without  reading  or  examining  it, 
signed  it  and  delivered  it  to  Miller;  the  paper  so  signed  was  the  note 
in  suit.  Plaintiff  purchased  in  good  faith  before  maturity,  paying 
therefor  $245. 

The  court  charged  the  jury:  "  If  you  find  that  this  paper  was 
never  delivered  as  a  note,  plaintiff  fails  in  his  action;  if  you  find 
that  it  was  delivered  but  this  plaintiff  failed  or  neglected  to  make 
the  proper  inquiry,  then  he  is  not  entitled  to  recover  for  he  fails  as 
a  bona  fide  holder." 

Plaintiff  excepted  generally  to  the  whole  of  the  charge. 

Plaintiff  requested  the  court  to  charge:  — 

First.  That  if  the  signature  upon  the  note  is  the  genuine  hand- 
writing of  defendant,  circumstances  of  fraud  in  its  inception  consti- 
tute no  defence  to  the  note  in  the  hands  of  an  innocent  purchaser. 

The  court  refused  to  so  charge. 

Second.  That  if  the  plaintiff  purchased  said  note  in  good  faith  and 
for  a  valuable  consideration,  the  plaintiff  is  entitled  to  judgment  for 
the  full  amount  thereof. 

Third.  That  if  defendant  negligently  and  without  sufficient  care 
and  precaution  put  his  name  to  the  paper  and  delivered  it  to  Miller, 
he  is  liable  for  its  amount  as  a  promissory  note. 

Fourth.  That  there  are  no  circumstances  in  this  case  indicating  a 
fraud  in  the  inception,  and  which  were  calculated  to  put  the  plaintiff 
on  his  guard,  and  therefore  he  is  a  purchaser  in  good  faith. 

The  court  declined  to  charge  either  of  these  propositions. 

Verdict  and  judgment  for  plaintiff  (defendant  ?) 

Johnson,  J.  — The  judge  charged  the  jury  that  if  the  paper  sued 
upon  was  never  delivered  as  a  note,  the  plaintiff  must  fail  in  the 
action;  and  that  even  if  it  was  delivered,  and  the  plaintiff  neglected 
to  make  proper  inquiry  as  to  its  origin,  he  was  not  a  bona  fide  holder 
and  could  not  recover.  The  exception  to  the  charge  was  general, 
but  if  both  propositions  were  erroneous  the  error  can  be  reached 
and  corrected;  especially  as  the  attention  of  the  judge  appears  to 
have  been  called,  by  requests  to  charge,  to  the  precise  grounds  on 
which  the  charge  is  now  claimed  to  be  erroneous. 


III.]  DEFENXES.  437 

The  latter  branch  of  the  charge  presents  the  question  of  notice  to 
put  a  party  on  inquiry,  as  affecting  his  right  to  be  regarded  as  a.  bona 
fide  holder.  It  is  now,  however,  the  settled  law  that  mere  negligence, 
however  gross,  is  not  sufficient  to  deprive  a  party  of  the  character 
of  a  bona  fide  holder.  There  must  be  proof  of  bad  faith.  That 
alone  will  deprive  him  of  that  character.  {Welch  v.  Sage,  47  N.  Y. 
143;  Seybel  v.  National  Currency  Bank,  Commission  of  Appeals,  54 
X.  Y.  288;  Miirrax  v.  Lardncr,  2  Wall,  no;  Goodman  v.  Sinionds,  20 
How.  452.)  This  part  of  the  charge,  therefore,  cannot  be  sustained. 
If,  then,  the  appellant  can  maintain  the  position  that  the  other 
branch  of  the  charge  is  also  erroneous,  he  will  be  entitled  to  the 
reversal  of  the  judgment,  notwithstanding  the  generality  of  the 
exception. 

The  evidence  tended  very  strongly  to  show  that  the  signature  of  the 
defendant  to  the  note  sued  upon,  was  obtained  from  him  through  a 
very  gross  and  fraudulent  representation  perpetrated  upon  him  by  one 
Miller.  That  when  he  signed  it,  he  supposed  he  was  signing  a  paper 
of  a  very  different  character,  and  not  an  engagement  to  pay  money 
absolutely.  He  had,  just  before,  signed  an  order  for  the  delivery  to 
himself  of  a  hay  fork  and  two  grappling  pulleys,  amounting  together 
in  price  to  nine  dollars,  for  which  he  engaged  to  pay;  and  this  paper 
now  in  suit  was  presented  to  him  as  a  duplicate  of  that  order,  and 
was  signed  as  such  without  examination  or  reading  it,  upon  the 
statement  of  Miller,  with  whom  he  was  dealing,  that  such  was  its 
character.  There  does  not  appear  to  have  been  any  physical  obsta- 
cle to  the  defendant's  reading  the  paper  before  he  signed  it.  He 
understood  that  he  was  signing  a  paper  by  which  he  was  about  to 
incur  an  obligation  of  some  sort,  and  he  abstained  from  reading  it. 
He  had  the  power  to  know  with  certainty  the  exact  obligation  he 
was  assuming,  and  chose  to  trust  the  integrity  of  the  person  with 
whom  he  was  dealing,  instead  of  exercising  his  own  power  to  pro- 
tect himself.  It  turns  out  that  he  signed  a  promissory  note,  and 
that  it  is  now  in  the  hands  of  a  holder  in  good  faith,  for  value.  The 
question  which  arises  on  the  branch  of  the  charge  now  under  con- 
sideration is,  whether  it  is  enough,  as  against  a  bona  fide  holder,  to 
show  that  he  did  not  know  or  suppose  that  he  was  signing  a  note, 
unless  it  also  appears  that  he  was  guilty  of  no  laches  or  negligence 
in  signing  the  instrument.  To  that  inquiry  the  attention  of  the 
judge,  at  the  trial,  was  distinctly  called;  and  the  instruction  which 
he  gave  and  which  was  excepted  to,  did  not  submit,  but  excluded 
the  consideration  of  it  from  the  jury.  It  is  quite  plain  that  if  the 
law  is  that  no  such  inquiry  is  admissible,  a  serious  blow  will  have 
fallen  upon  the  negotiability  of  paper.      It  will  be  a  premium  offered 


438  RIGHTS   OF    HOLDER.  [ART.  V. 

to  negligence.  To  insure  irresponsibility  only  the  utmost  careless- 
ness, coupled  with  a  little  friendly  fraud,  will  be  essential.  Paper 
in  abundance  will  be  found  afloat,  the  makers  of  which  will  have  had 
no  idea  they  were  signing  notes,  and  will  have  trusted  readily  to  the 
assurance  of  whoever  procured  it  that  it  created  no  obligation.  To 
avoid  such  evils  it  is  necessary,  at  least,  to  hold  firmly  to  the  doc- 
trine that  he  who,  by  his  carelessnes  or  undue  confidence,  has 
enabled  another  to  obtain  the  money  of  an  innocent  person,  shall 
answer  the  loss.  If  it  be  objected  that  there  must  be  a  duty  of  care, 
in  order  to  found  an  allegation  of  negligence  upon  the  neglect  of  it, 
it  must  be  answered  that  every  man  is  bound  to  know  that  he  may 
be  deceived  in  respect  to  the  contents  of  a  paper  which  he  signs 
without  reading.  When  he  signs  an  obligation  without  ascertaining 
its  character  and  extent,  which  he  has  the  means  to  do,  upon  the 
representation  of  another,  he  puts  confidence  in  that  person;  and  if 
injury  ensues  to  an  innocent  third  person  by  reason  of  that  confi- 
dence, his  act  is  the  means  of  the   injury,  and  he  ought  to  answer 

to  it. 

In  Foster  v.  MacKinnon  (L.  R.  4  C.  P.  704),  the  action  was  upon  an 
indorsement  of  a  bill  of  exchange,  and  the  evidence  was  that  the 
defendant  indorsed  it  believing  it  to  be  a  guarantee  —  that  being 
represented  to  him  as  its  nature  by  a  person  in  whom  he  put  confidence. 
The  judge  charged  the  jury  that  if  the  defendant  signed  it  not  know- 
ing it  to  be  a  bill,  but  believing  it  to  be  a  guarantee,  in  consequence 
of  a  fraudulent  representation  as  to  its  character,  and  if  he  was  not 
guilty  of  any  negligence  or  laches  in  signing  it,  he  was  not  bound. 
The  jury  found  for  the  defendant.  Upon  a  review  of  the  decision, 
and  after  a  very  full  and  able  discussion  of  the  questions  involved, 
the  court  held  the  direction  at  the  trial  to  have  been  right;  but  a 
new  trial  was  granted  upon  the  ground  that  they  were  not  satisfied 
with  the  finding  of  the  jury  on  the  question  of  fact,  as  I  understand 
it,  in  respect  to  thq  question  of  negligence. 

In  Whitney  v.  Snyder  (2  Lans.  477),  evidence  had  been  refused 
that  the  defendant  was  unable  to  read,  and  that  the  note  which  he 
had,  in  fact,  signed  was  represented  to  him  to  be  an  instrument  of 
a  different  character,  and  was  signed  by  him  under  such  a  belief. 
The  court  held  that  the  evidence  ought  to  have  been  received,  princi- 
pally upon  the  ground  and  authority  of  the  case  last  cited  —  approv- 
ing both  branches  of  the  rule  as  stated  in  that  case,  and  adding  that 
the  case  then  in  judgment  was  stronger  for  the  defendant  on  the 
question  of  negligence  than  was  Foster  v.  MacKinnon.  This  was 
clearly  so;  for  in  Whitney  v.  Stiyder  it  appeared  that  the  defendant 
could  not  read,  and  he  was  therefore  compelled  to  put  confidence  in 


III.]  '  DEFENCES.  439 

some  one  as  to  the  contents  of  an}'  paper  which  he  might  be  called 
upon  to  sign.  Indeed,  the  same  exception  in  respect  to  negligence 
is  recognized  as  a  necessary  element  in  the  decision  at  General 
Term  in  this  case.  The  difficulty  is  that,  at  the  trial,  the  judge 
rejected  that  qualification  of  the  rule,  and  held  that  if  the  party  did 
not  intend  to  make  a  promissory  note  he  could  not  be  held  bound, 
even  in  favor  of  a  bona  fide  holder  for  value. 

The  principle  involved  is  recognized  and  in  substance  decided  in 
PutnaiJi  v.  Sullivan  (3  Mass.  45).  In  that  case  the  defendants  had 
left  with  a  clerk  some  signatures  on  blank  pieces  of  paper,  intended 
to  be  used  as  notes  or  indorsements,  according  to  specific  instruc- 
tions. The  clerk  was  induced  by  fraud  to  part  with  one  of  these 
blank  signatures,  and  it  was  filled  up  as  a  note  leaving  the  signature 
to  appear  as  that  of  a  payee  and  indorser.  The  action  was  by  a 
holder  in  good  faith,  and  the  court,  giving  judgment  by  Chief  Justice 
Parsons,  say:  "  The  counsel  make  a  distinction  between  the  cases 
where  the  indorser,  through  fraudulent  pretenses,  has  been  induced 
to  indorse  the  note  he  is  called  upon  to  pay,  and  when  he  never 
intended  to  indorse  a  note  of  that  description  but  a  different  note 
and  for  a  different  purpose.  Perhaps  there  may  be  cases  in  which 
this  distinction  ought  to  prevail;  as  if  a  blind  man  had  a  note  falsely 
and  fraudulently  read  to  him,  and  he  indorsed  it  supposing  it  to  be 
the  note  read  to  him.  But  we  are  satisfied  that  an  indorser  cannot 
avail  himself  of  this  distinction,  but  in  cases  where  he  is  not  charge- 
able with  any  laches  or  neglect  or  misplaced  confidence  in  others. 
Here,  one  of  two  innocent  parties  must  suffer.  .  .  .  The  loss 
has  been  occasioned  by  the  misplaced  confidence  of  the  indorsers 
in  a  clerk  too  young  or  too  inexperienced  to  guard  against  the  acts 
of  the  promisors."  Upon  these  grounds  the  indorsers  were  held 
liable. 

In  Douglas  v.  Matti/ig  (29  Iowa,  498),  the  judge  says:  "It  is 
better  that  the  defendants  and  others  who  so  carelessly  affix  their 
names  to  papers,  the  contents  of  which  are  unknown  to  them,  should 
suffer  from  the  fraud  their  recklessness  invites,  than  that  the  char- 
acter of  commercial  paper  should  be  impaired  and  the  business  of 
the  country  thus  interfered  with  and  unsettled." 

In  all  these  cases,  the  real  ground  of  decision  is  not  that  the  party 
meant  to  make  a  promissory  note,  but  that  meaning  to  make  an  obli- 
gation in  writing,  and  which  was  put  in  writing  that  it  might  of  itself 
import  both  the  fact  and  the  form  and  the  measure  of  the  obliga- 
tion, he  trusted  another  to  fix  that  form  and  measure,  without  exer- 
cising that  supervision  which  was  in  his  power  and  by  which  perfect 
protection  was  possible.     In  such  cases,  the  rule  is,  that  he  is  bound 


440  RIGHTS    OF    HOLDER.  [ART.   V. 

by  the  act  of  him  who  has  been  trusted  in  favor  of  a  holder  in  good 
faith. 

The  judgment  must  be  reversed  and  a  new  trial  granted,  costs  to 
abide  the  event. 

All  concur.     Judgment  reversed. 


§  94  LEWIS  V.   CLAY.  [§  55] 

42  Solicitors'  Journal  (Jan.  i,  189S),  151,  67  L.  J.  O.  B.  224. 

AcTiox  by  payee  against  defendant  as  one  of  two  makers  of  two 
joint  and  several  promissory  notes,  for  ^3,113,  15s.,  and  ^8,000, 
respectively.  It  is  admitted  that  defendant's  signatures  are  genuine 
and  that  his  signatures  to  two  letters  authorizing  plaintiff  to  pay  the 
proceeds  to  Lord  William  Nevill,  the  other  maker,  are  also  genuine. 
Plaintiff  gave  value  in  good  faith  for  the  notes.  Defendant's  signa- 
tures to  the  notes  and  letters  were  procured  by  Lord  William  Nevill 
in  this  wise:  The  latter  came  to  defendant  and  asked  him  to  wit- 
ness some  documents,  producing  a  roll  of  papers  covered  by  blotting 
or  other  paper  in  which  there  were  four  openings;  defendant  asked 
what  the  documents  were  and  was  answered  that  they  concerned 
private  family  matters,  that  defendant  could  see  them  if  he  insisted, 
but  it  was  preferred  that  he  should  not;  defendant  did  not  insist  and 
signed  his  name  four  times  through  the  openings.  Lord  William 
Nevill  also  signed,  and  defendant  believed  he  was  signing  as  witness 
to  the  former's  signatures.  Defendant  had  just  come  of  age,  had 
known  Lord  William  Nevill  intimately  for  some  years,  and  had  no 
reason  to  doubt  his  honor. 

The  following  questions  were  put  to  the  jury,  who  gave  the  answer 
appended  to  each:  —  (i)  Did  the  plaintiff  take  the  promissory  notes 
in  good  faith?     [It  is  admitted  he  took  them  for  value.]     Answer. — 

'  "  The  law  of  the  State  is,  that  where  a  party  is  induced  to  sign  a  negotiable 
instrument  by  reason  of  fraud,  artifice  or  deception  practiced  upon  him  by 
another  as  to  the  nature  of  the  instrument,  and  the  maker  signs  the  same  inno- 
cently and  under  the  belief  that  it  was  a  contract  of  a  different  character,  then 
there  can  be  no  recovery  upon  the  note,  although  the  holder  may  be  an  innocent 
purchaser  for  value  before  maturity,  unless  the  maker  was  guilty  of  laches  or 
carelessness  in  omitting  to  read  the  same,  or  by  some  other  means  ascertaining 
the  true  nature  and  import  of  the  instrument.  {N'aticmal  Ex.  Bk.  v.  Veneman, 
43  Hun,  241,  cited  with  approval  in  Pas;e  v.  Krekey,  137  N.  Y.  ■\\'i)r—Hutkoff\-. 
Moje,  20  Misc.  (.n.  Y.)  632  (1S97.)  Negligence  on  the  part  of  the  one  signing 
renders  him  liable  to  a  holder  in  due  course.  Shirts  v.  Overjjhn,  60  Mo.  305; 
Citizens'  Xat.  Bank  v.  Smith,  55  N.  H.  593;  Kellogg  v.  Curtis.  63  Me.  59;  Xeheker 
V.  Ctttsinger,  48  Ind.  436;    Ort  v.  Fowler,  31  Kans.  478.  —  Ed. 


III.]  DEFEN'CES.  44I 

Yes.  (2)  Is  the  defendant's  account  of  the  circumstances  under 
which  he  signed  his  name  substantially  true?  Answer. —  Yes.  (3)  Was 
the  defendant,  in  signing  his  name  as  he  did,  recklessly  careless,  and 
did  he  thereby  enable  Lord  William  Nevill  to  perpetrate  the  fraud? 
Answer.  —  No;  not  under  the  circumstances.  (4)  Were  the  signa- 
tures to  the  documents  given  by  the  defendant  in  misplaced  confi- 
dence in  the  statements  of  Lord  William  Nevill  as  to  their  nature  ? 
Answer.  — Yes.  (5)  Did  the  defendant  sign  his  name  to  be  used  by 
Lord  William  Nevill  for  any  purpose  he  chose?  Answer. — No. 
(6)  Did  the  defendant  attach  his  signature  to  the  documents  without 
due  care  ?     Answer.  —  No;  not  under  the  circumstances. 

On  these  findings  the  case  was  reserved  by  the  Lord  Chief  Justice 
for  further  consideration. 

Lord  Russell  of  Killowen,  C.  J.  —  I  have  now  to  consider  in  the 
light  of  these  findings  which  of  the  parties  is  entitled  to  judgment. 
It  is  clear  that  the  proof  of  the  signature  of  the  defendant  to  the 
promissory  notes,  coupled  with  proof  of  their  delivery  to  the  plaintiff 
under  the  apparent  authority  of  the  defendant,  makes  out  a/r/;//<? 
facie  case  for  the  plaintiff.  Is  it  a  conclusive  case  ?  Here  two 
questions  arise  —  (i)  Is  the  defendant  precluded  or  estopped  from 
setting  up  the  true  circumstances  under  which  his  name  came  to 
appear  on  the  documents  in  question?  (2)  If  not,  do  those  true 
circumstances  afford  an  answer  in  point  of  law  to  the  plaintiff's 
claim  ' 

I.  As  to  the  first  question  the  defendant  is  not,  in  my  judgment, 
estopped  or  precluded  from  setting  up  the  actual  facts  upon  any 
principle  of  law.  Apart  from  statute  such  prechsion  or  estoppel 
can  only  arise  (in  circumstances  like  the  present)  where  the  defend- 
ant had  so  conducted  himself  that  it  would  be  contrary  to  natural 
justice  to  permit  him  to  assume  a  position  inconsistent  with  that 
which  he  had  ostensibly  occupied,  or  which  he  led  others  to  believe 
he  occupied,  and  upon  which  others  had,  misled  by  his  conduct,  been 
suffered  to  act.  In  the  present  case  the  suggestion  on  the  part  of 
the  plaintiff  is  that  the  defendant  had  not  used  due  care  in  signing  his 
name,  and  that  he  had  signed  in  misplaced  confidence  in  Lord 
William  Nevill.  The  jury  have  found  that  there  was,  in  fact,  no 
want  of  due  care  in  the  circumstances  in  signing  his  name  as  he  did; 
but  it  was  urged  that  the  finding  as  to  misplaced  confidence  was 
sufficient,  and  the  authority  of  a  distinguished  American  judge  in  the 
case  of  Putnatn  v.  Sullivan  (4  Mass.  45)  was  cited.  What  does  mis- 
placed confidence  mean  ?  It  may  mean  confidence  placed  where  you 
know  or  ought  to  know  it  is  not  safe,  or  confidence  placed  where 
you  have  every  right  to  believe  it  is  safe,  but  where  it  is  afterwards 


442  RIGHTS   OF    HOLDER.  [ART.  V. 

betrayed.  The  former,  I  think,  is  the  case  the  learned  judge  had  in 
his  mind,  and  the  facts  there  may  afford  evidence  of  want  of  due 
care;  but  that  clearly  is  not  here  the  meaning  attributed  by  the  jury 
to  misplaced  confidence,  for  they  have  found  that  there  was  in  the 
circumstances  no  want  of  due  care  on  the  part  of  the  defendant. 
Taking  the  findings  together  they  amount  to  this  —  that  the  defend- 
ant was  in  the  circumstances  guilty  of  no  want  of  due  care  in  placing 
confidence  in  the  statement  made  by  Lord  William  Nevill,  and 
accordingly  in  signing  his  name  as  he  did;  and  I  decline  to  hold  that 
the  placing  of  confidence  as  here  shown,  which  is  afterwards  betrayed, 
where  it  is  not  recklessly  or  negligently  so  placed,  in  any  way  pre- 
cludes the  defendant  from  setting  up  the  true  facts  as  a  defence. 
I  conclude,  therefore,  the  defendant  is  not,  upon  any  principle  of 
law,  estopped  or  precluded  from  setting  up  the  true  facts. 

How,  then,  is  the  plaintiff's  case  put  ?  It  was  argued  that  what- 
ever was  the  law  before  or  apart  from  the  Bills  of  Exchange  Act,  1882, 
the  facts  here  did  not  under  that  Act  afford  a  defence  as  against  a 
"holder  in  due  course,"  which,  it  was  said,  the  plaintiff  was  within 
section  29,  and  that  the  question  must  be  determined  by  reference 
to  that  Act  alone.  I  think  this  argument  involves  a  misconception 
both  of  the  plaintiff's  position  and  of  the  scope  and  effect  of  the  Act 
of  1882.  It  will  be  apparent  from  a  consideration  of  the  facts  of  the 
case  that  the  plaintiff  was  not  a  "  holder  in  due  course  "  at  all,  but 
that  he  was,  in  fact,  simply  the  named  payee  of  two  promissory  notes. 
Further,  an  examination  of  sections  20,  21,  29,  30,  and  38,  relating 
expressly  to  bills,  and  sections  83,  84,  88,  and  89,  relating  to  promis- 
sory notes,  will  make  it  quite  clear  that  "  a  holder  indue  course  "  is 
a  person  to  whom,  after  its  completion  by  and  as  between  the  imme- 
diate parties,  the  bill  or  note  has  been  negotiated.  In  the  present 
case  the  plaintiff  is  named  as  payee  on  the  face  of  the  promissory 
note,  and  therefore  is  one  of  the  immediate  parties.  The  promis- 
sory notes  have,  in  fact,  never  been  negotiated  within  the  meaning 
of  the  Act. 

I  desire  to  say  here  that,  even  if  the  plaintiff  were  "  holder  in  due 
course,"  it  would,  in  my  judgment,  make  no  difference  in  the  result. 

But  is  the  contention  right  that  the  Act  of  1882  must  alone  be 
looked  to?  I  think  not.  That  Act  was  intended  to  be  mainly  a  codi- 
fication of  the  existing  law,  but  it  is  not  merely  a  codification  Act, 
for  some  alterations  of  the  law  are  clearly  effected  by  it  and  it  does 
not  purport  to  be  exhaustive,  for,  by  section  97,  the  rules  of  the 
Common  Law  (including  the  Law  Merchant),  save  in  so  far  as  they 
are  inconsistent  with  the  express  provisions  of  the  Act,  continue  to 
apply.     But  I  agree  that  in  determining  questions  of  liability  on  bills 


III.]  DEFENCES.  443 

or  notes  it  is  proper  to  exanane  the  Act  before  turning  to  the  cases 
declaratory  of  the  Common  Law  decided  before  that  Act. 

It  is  unnecessary  to  set  out  the  provisions  of  the  Act  and  to  com- 
ment in  detail  upon  them.  It  is  enough  to  say  that  there  is  nothing 
in  the  Act  which  prevents  the  defendant  from  setting  up  the  defence 
that  he  never  made  the  promissory  notes  in  question  —  which  is  the 
real  defence  here.  It  would,  indeed,  be  strange  if  it  did.  For  the 
purposes  of  the  present  case  the  question  is  precisely  the  same  as  if 
any  other  contract  than  one  by  promissory  note  had  been  written  on 
the  documents  to  which  the  defendant  was  induced  to  sign  his 
name  —  for  instance,  if  it  had  been  a  contract  of  guarantee  or  surety- 
ship. Then  the  question  would  have  been  —  Did  the  defendant 
make  the  contract  of  guarantee  or  suretyship?  Here  it  is  —  Did  he 
make  the  promissory  notes  sued  upon? 

II.  The  question,  then,  is,  on  the  facts  as  they  are  now  found  to 
be  —  Did  the  defendant  make  the  promissory  notes  in  question?  If 
he  did  not,  then  the  finding  of  the  jury  that  the  defendant  was  not 
guilty  of  any  want  of  due  care  establishes  that  he  is  not  precluded 
from  saying  so.  That  there  is  a /r/w^z/^^r/^  case  on  the  plaintiff's 
evidence  that  he  did,  I  have  already  said;  but  is  \.\\z.\.  prima  facie  case 
rebutted  and  displaced  by  the  defendant's  evidence?  According  to 
that  evidence  it  must,  after  the  findings  of  the  jury,  be  taken  to  be 
the  fact  that  he  was  witnessing  a  deed  or  document;  that  he  was  so 
told;  that  he  had  no  idea  of  signing,  and  was  not  asked  to  sign,  any 
bill  or  promissory  note,  or  to  undertake  any  contractual  obligation 
of  any  kind.  A  promissory  note  is  a  contract  by  the  maker  to  pay 
the  payee.  Can  it  be  said  that  in  this  case  the  defendant  contracted 
to  pay  the  plaintiff?  His  mind  never  went  with  such  a  transaction; 
for  all  that  appears,  he  had  never  heard  of  the  plaintiff,  and  his 
mind  was  fraudulently  directed  into  a  different  channel  by  the  state- 
ment that  he  was  merely  witnessing  a  deed  or  other  document.  He 
had  no  contracting  mind,  and  his  signature  obtained,  by  untrue 
statements  fraudulently  made,  to  a  document  of  the  existence  of 
which  he  had  no  knowledge,  cannot  bind  him.  It  is  as  if  he  had 
written  his  name  for  an  autograph  collector,  or  in  an  album.  The 
case  differs  in  no  material  respect  from  one  in  which  a  genuine  signa- 
ture is  deftly  transferred  by  delicate  contrivance  from  one  document 
to  another,  and  so  skillfully  as  to  escape  notice  under  ordinary 
examination.  Or,  again,  if  the  body  of  the  promissor}'  notes  had 
been  fraudulently  written  above,  and  after  his  signature  had  been 
made,  it  would  have  been  forgery,  and  in  such  case  it  is  clear  no 
recourse  could  be  had  upon  it.  Can  it  make  any  difference  as  to 
resulting  contractual  obligation  that  the  body  of  the  note  was,  with- 


444  RIGHTS    OF    HOLDER.  [ART.  V. 

out  his  knowledge,  filled  up  before  he  was  fraudulently  induced  to 
put  his  name  in  the  belief  that  it  was  something  wholly  different  ? 
I  think  not.  In  plain  reason  it  must  be  said  that  the  use  to  which 
the  defendant's  signature  was  applied  was  in  substance  and  effect 
forgery,  whether  or  not  it  amounted  to  the  criminal  offense  of 
forgery. 

I  think  it  well  to  point  out  that  cases  like  the  present  differ  widely 
from  those  in  which  the  party  sought  to  be  charged  has  agreed  and 
intended  to  enter  into  contractual  obligation  by  bill  or  note,  but  has 
been  defrauded  into  agreeing,  or  been  defrauded  in  the  manner  in 
which  the  bill  or  note  has  been  dealt  with.  In  such  cases  he  is  liable 
on  principle  and  authority,  to  any  one  who  has  dealt  with  the  bill  or 
note  in  good  faith  and  for  value. 

It  was  in  argument  admitted  that  the  case  of  Foster  v.  Mackinnon 
(17  \V.  R.  1 105,  4  L.  R.  C.  P.  704),  is  in  point,  and  is  an  authority 
binding  on  me  if  the  Bills  of  Exchange  Act  of  1S82  has  not  altered 
the  law  as  there  declared.  I  find  that  the  law  has  not  been  so 
altered.  I  see  nothing  in  the  Act  to  warrant  the  suggestion  that  it 
has  been  altered,  and  it  is  noteworthy  that  all  the  text-writers  deal- 
ing with  the  Bills  of  Exchange  Act,  1S82  (including,  indeed,  the 
draftsman  of  the  Act),  treat  that  case  as  an  existing  authority.  The 
facts  in  Foster  v.  Mackinnon  were,  that  an  old  man  of  feeble  sight 
was  induced  —  without,  as  the  jury  found,  any  negligence  on  his 
part  —  to  sign  his  name  on  the  back  of  a  bill  by  the  fraudulent  state- 
ment that  it  was  a  guarantee  which,  in  fact,  he  had  undertaken  to 
sign.  The  Court  of  Common  Pleas  (consisting  of  Bovill,  C.  J.,  and 
Byles,  Keating,  and  Montagu  Smith,  JJ.),  held  that  he  was  not 
liable,  and  this  in  an  action  by  what  was  then  called  a  bona  fide  holder 
for  value  and  without  notice,  of  which  "  holder  in  due  course  "  is  now 
the  legal  equivalent. 

In  these  islands,  cases  in  litigation  of  frauds  such  as  that  here  prac- 
ticed are  of  rare  occurrence,  partly  because  of  the  existence  and 
character  of  our  stamp  laws,  but  in  the  United  States  of  America, 
where  no  such  laws  exist,  there  are  many  authorities  dealing  with 
points  similar  to  that  in  the  present  case.  [Douglas  r.  Matting,  4 
Am.  Rep.  23S  [29  Iowa,  49S] ;  Taylor  v.  Atchison,  5  .A.m.  Rep.  iiS 
[54  111.  1 96 J;  Whitney  v.  Snyder,  2  Lans.  477;  Walker  v.  Fbert,  9 
Am.  Rep.  548  [29  Wis.  194];  Griffiths  v.  Kellogg,  20  Am.  Rep.  48 
[39  Wis.  290]).  The  great  weight  of  United  States  authorities  sup- 
ports the  view  of  the  common  law  expressed  by  the  English  judges. 
I  have  thought  it  right  to  say  so  much,  but  in  truth  these  authori- 
ties are  not  necessary  for  the  purposes  of  this  case.  They  are  all 
cases  where  the  bills  or  notes  had  been  negotiated  to  persons  now 


III.]  DEFENCES.  445 

called  "  holders  in  due  course."  It  follows,  if  such  a  holder  cannot  in 
a  case  like  the  present  recover,  a  fortiori  that  the  plaintiff  —  who,  as 
named  payee,  is  one  of  the  immediate  parties  —  cannot  recover. 

In  the  result,  therefore,  my  judgment  must  be  for  the  defendant, 
and  the  plaintiff  must  be  enjoined  from  in  any  way  dealing  with  the 
notes,  and  the  same  must  be  canceled  so  far  as  they  purport  to  be 
the  notes  of  the  defendant. 


ARTICLE  VI. 

Liability  of   Parties. 

I.  Maker:  absolute,  primary  liability;  admissions. 

I.   Presentment  for  payment   unnecessary. 
See  Neg.  Inst.  Law,  §  130  [-jo], /os/,  pp.  498-501. 

2.   LiBAiLiTY  on  Lost  or  Destroyed   Instrument. 

§  1 10        McGREGORY  v.   McGREGORY.        [§  60] 

107  Massachusetts,  543.  —  1S71. 

Action  against  makers  on  notes  alleged  to  be  lost.  Verdict  for 
plaintiff,  who  filed  a  bond  for  protection  of  defendants  from  liability 
on  the  lost  notes,  to  the  approval  of  the  judge. 

Gray,  J.'  —  Destruction  by  fire  is  one  mode  by  which  property 
may  be  lost,  and  an  allegation  that  a  note  has  been  lost  is  fully  sup- 
ported by  proof  that  it  has  been  destroyed  by  fire. 

It  is  well  settled  in  this  commonwealth,  that  an  action  at  law  may 

be    maintained    on    a    lost    promissory    note,   whenever   a    bond  of 

indemnity  will  afford  complete  protection  to  the  defendant;  and  that 

such  an  action  maybe  maintained  against  the  maker  of  such  a  note, 

upon  filing  a  sufficient  bond  of  indemrjity.     All  the  makers  of  the 

notes  described  in  these  three  counts  are  defendants  in  this  action; 

and  they  do  not  stand  like  an  indorser  of  a  promissory  note,  who  is 

entitled,  upon  taking  it  up,  to  the  possession  thereof,  in  order  that 

he   may  have   his  recourse   over  against  the  maker,  or  negotiate  it 

again;  or  like  the  acceptor  of  a  bill  of  exchange,  who  may  need  it  as 

a  voucher  in  settling  his  account  with  the  drawer.      [Falcs  v.  Russell, 

16   Pick.   315;  Almy  v.  Reed,    10  Gush.  421;   Boston  Lead  Co.  v.  Mc- 

Giiirk,  15  Gray,  87;    Tower  \.  Appleto/i  Bank,  3  Allen,  387;  Tutlle  v. 

Siandish,   4  Allen,   481;  Savatmah  National  Bank  v.    Haskins,"^    loi 

Mass.  370.) 

Judgment  on  the  verdict  for  the  plaintiff.' 

'  Omitting  other  questions.  —  Ed. 

'  Holds  acceptor  of  lost  bill  liable  only  in  equity.  Accord:  Pierson  v.  Hutch- 
inson, 2  Camp.  211.  —  Ed. 

'  If  a  note  or  bill  is  shown  actually  to  have  been  destroyed,  most  courts  allow 

[446] 


I.]  MAKER.  447 

3.   Admission  of  Existence  and  Capacity  of  Payee. 

§110  JOHNSON  z'.   COXKLIN.  [§  60J 

119  Indiana,  109.  —  1S8S. 

Elliott,  C.  J.  —  The  plaintiff,  Maria  Conklin,  brought  this 
action  to  recover  the  amount  evidenced  by  a  promissory  note  exe- 
cuted to  her  as  payee  by  the  appellant.  The  trial  court  sustained 
demurrers  to  several  paragraphs  of  the  answer  filed  by  the  appel- 
lant. .  .  .  The  answer  is  bad.  It  seeks  to  show  that  the  payee 
of  the  note  was  not  the  real  party  in  interest  at  the  time  the  note 
was  executed,  and  this  the  maker  of  a  promissory  note  is  estopped 
from  doing.  [Blacker  v.  Dunbar,  108  Ind.  217;  Wells  v.  Stttton,  85 
Ind.  70;  Rogers  v.  Place,  29  Ind.  577;  French  v.  Blanchard,  16  Ind. 

I43-) 

Judgment  affirmed,  with  ten  per  centum  damages.' 


§  no  FRAZIER  V.   MASSEY.  [§  60] 

14  Indiana,  382.  —  i860. 
[Reported  herein  at  p.  321.]  " 

an  action  at  law.  Des  Artsw  Leggett,  16  N.  Y.  582;  Dean  v.  Speakman,  7  Blatchf. 
(Ind.)  317.  But  not  if  it  is  voluntarily  destroyed  by  the  holder.  Blade  v. 
Noland,  12  Wend.  (N.  Y.)  173.  Some  courts  make  a  distinction  between  instru- 
ments lost  before  maturity  and  those  lost  after  maturity,  allowing  an  action  at 
law  on  the  latter.  Thayer  v.  A'iiig,  15  Ohio,  242;  Mowery  v.  Mast,  14  Neb.  510. 
But  other  courts  deny  the  validity  of  this  distinction.  Jlloses  v.  Triee,  21  Gratt. 
(Va.)  556.  See  in  general  on  lost  or  destroyed  bills  and  notes,  2  Daniel  on  Neg. 
Inst.,  §§  1475-1485. 

The  matter  is  governed  by  statute  in  New  York.  Code  Civ.  Proc, 
§  1917.  —  Ed. 

1  Maker  of  a  note  payable  to  the  order  of  "A.  B.  Attorney-General  "  cannot 
dispute  his  right  to  transfer  it.  IVcdAe  v.  Kuhne,  109  Ind.  313.  Maker  of  a  note 
payable  at  "A.  B."  cannot  deny  the  existence  of  such  a  place  when  the  statute 
requires  negotiable  instruments  to  be  payable  at  a  place  certain.  Brown  v. 
First  N.  B.,  103  Ala.  123.  Contra,  where  the  statute  requires  it  to  be  payable  at 
a  bank.     Parkinson  v.  Finch,  45  Ind.  122.  —  Ed. 

2  In  like  manner  the  drawer  {Grey  v.  Cooper,  3  Doug.  65),  and  acceptor  {Taylor 
V.  Crokcr,  4  Esp.  187;  Smith  v.  Marsack,  6  C.  B.  486),  admit  the  existence  of  the 
payee  and  his  then  capacity  to  contract.  See  two  following  sections  of  Neg. 
Inst.  Law.  —  Ed. 


448  LIABILITY    OF    PARTIES.  [ART.  VI. 

II.  Acceptor:  absolute,  primary  liability;  admissions. 

I.   Presentment  for  Payment  Unnecessary. 

See  Neg.  Inst.  Law,  §  130  [jo]; />os/,  pp.  498-501. 

2.   Admissions  as  to  Drawer  and  Payee. 

§  112     NATIONAL  PARK  BANK  v.  NINTH  NATIONAL    [§62] 

BANK. 

46  New  York,  77.  —  1871. 

The  first  case  is  an  appeal  from  judgment  of  the  late  General 
Term  of  the  first  judicial  district,  reversing  order  of  Special  Term 
sustaining  demurrer  to  complaint,  and  also  judgment  entered  upon 
said  order. 

The  last  is  an  appeal  from  judgment  of  General  Term,  New  York 
Common  Pleas,  affirming  judgment  of  Special  Term  of  that  court 
overruling  demurrer  to  complaint. 

The  complaint  in  the  first  case  states,  in  substance,  that  on  the 
25th  March,  1867,  the  Ridgely  National  Bank,  of  Springfield,  Illinois, 
drew  its  draft,  or  bill  of  exchange  on  plaintiff,  for  the  sum  of 
fourteen  dollars  and  twenty  cents,  payable  to  the  order  of  Ely 
Shirly,  and  delivered  the  same  to  the  payee.  That  afterwards  the 
amount  of  said  draft  was  fraudulently  changed  to  $6,300.00,  and  the 
name  of  the  payee  to  E.  G.  Fanchon,  Esq.  That  the  name  of  Win. 
Ridgely,  cashier,  signed  to  said  draft  was  erased,  and  afterward 
re-written  by  the  person  making  the  erasure.  That  the  same  was 
then  discounted  by  the  Lexington  National  Bank,  and  by  it  was 
indorsed  to  defendant.  That  afterward,  and  on  or  about  April  12, 
1867,  defendant  presented  said  draft  to  plaintiff,  and  said  plaintiff 
paid  thereon  the  sum  of  $6,300.  That  plaintiff  discovered  the 
forgery  May  10,  1867,  and  fortliwith  notified  defendant  thereof,  and 
demanded  re-payment  of  said  sum,  less  fourteen  dollars  and  twenty 
cents,  which  was  refused.  Defendant  demurs,  "  that  the  complaint 
does  not  state  facts  sufficient  to  constitute  a  cause  of  action." 

In  the  last  case  the  facts  are  similar,  save  as  to  amount  and  names. 

Allen,  J.  — The  checks  paid  by  the  plaintiffs,  the  drawees,  were 
forgeries  throughout,  as  well  the  signatures  as  the  bodies.  The 
name  of  the  signer,  the  cashier  of  the  Ridgely  Bank,  was  not  the 
genuine  signature  of  that  officer,  and  was  not  written  by  his 
authority.  The  fact  that  a  genuine  check  had  been  drawn,  and 
signed  by  the  proper  party,  upon  the  same  piece  of  paper,  does  not 


II.]  ACCEPTOR.  449 

affect  the  character  of  the  instrument  in  its  altered,  and  forged  con- 
dition. The  forger,  by  skillfully  obliterating  the  genuine  signature, 
together  with  the  words  and  figures  indicating  the  amount  payable 
thereon,  effectually  destroyed  the  instrument,  and  it  was  incapable 
of  being  restored  to  its  original  condition,  in  the  form  of  a  check, 
and  made  available  for  any  purpose. 

It  was  but  a  blank  form  of  a  draft  or  bill,  and  the  act  of  signing 
the  name  of  the  cashier  as  drawer,  with  intent  to  utter  and  pass  the 
same  as  genuine,  was  a  crime,  and  the  signature  a  forgery,  whether 
the  check  was  for  the  same  or  a  different  amount  from  that  for 
which  the  original  and  genuine  bill  had  been  drawn. 

Whether  the  forger  used  the  same  paper  on  which  the  original 
instrument  had  been  written  and  signed,  and  manipulated  it  to  suit 
his  purposes,  or  made  and  forged  a  check  on  another,  and  different 
piece  of  paper  is  not  material,  so  long  as  the  signature  of  the  drawer 
was  counterfeit. 

The  drafts  paid  by  the  plaintiff  were  not  merely  raised  checks, 
that  is,  forged  and  altered  by  the  obliteration  and  removal  of  one 
sum,  and  the  insertion  of  another,  but  were  forged  instruments  in 
every  sense. 

The  drafts  signed  by  the  cashier  are  not  in  existence  in  form  as 
drafts.  The  genuine  signature  was  wanting  to  make  the  instru- 
ments the  checks  of  the  nominal  drawer  for  any  amount.  The 
money  was  then  paid  by  the  plaintiff  upon  bills  drawn  upon  it,  to 
which  the  name  of  its  correspondent  had  been  forged. 

For  more  than  a  century  it  has  been  held  and  decided,  without 
question,  that  it  is  incumbent  upon  the  drawee  of  a  bill  to  be  satis- 
fied that  the  signature  of  the  drawer  is  genuine,  that  he  is  presumed 
to  know  the  handwriting  of  his  correspondent,  and  if  he  accepts  or 
pays  a  bill  to  which  the  drawer's  name  has  been  forged,  he  is  bound 
by  the  act,  and  can  neither  repudiate  the  acceptance  nor  recover 
the  money  paid. 

The  doctrine  was  broached  by  Lord  Raymond  in  J^eiiys  v.  Faivler 
(2  Strange,  946),  the  Chief  Justice  strongly  inclining  to  the  opinion 
that  even  actual  proof  of  forgery  of  the  name  of  the  drawer  would 
not  excuse  the  defendants  against  their  acceptance.  In  1762  the 
principle  was  flatly  and  distinctly  decided  by  the  Court  of  King's 
Bench,  in  the  leading  case  oi  Price  v.  Ncal  (3  Burrows,  1354),  which 
was  an  action  to  recover  money  paid  by  the  drawee  to  the  holder 
of  a  forged  bill.  Lord  Mansfield  stopped  the  counsel  for  the  defend- 
ant, saying  that  it  was  one  of  those  cases  that  never  could  be  made 
plainer  by  argument;  that  it  was  incumbent  on  the  plaintiff  to  be 
satisfied  that  the  bill  drawn  upon  him  was  the  drawer's  hand,  before 

NEGOT.   INSTRUMENTS  —  29. 


450  LIABILITY    OF    PARTIES.  [ART.  VI. 

he  accepted  and  paid  it,  but  it  was  not  incumbent  for  the  defendant 
to  inquire  into  it.  This  case  has  been  followed  and  the  doctrine 
applied,  almost  without  question  or  criticism,  in  an  unbroken  series 
of  cases,  from  that  time  to  this,  and  it  has  been  distinctly  approved 
in  very  many  cases,  which  have  not  been  within  the  precise  range  of 
the  principle  decided.  (See  Archer  v.  Bank  of  England,  2  Doug. 
639;  Smith  V.  Mercer,  6  Taunt.  76;  Wilkinson  v.  J^ohnson,  3  B.  &  C. 
428;  Cook  V.  Masterman,  7  B.  &  C.  902;  Cooper  v.  Meyer,  10  B.  &  C. 
468;  Saiindcrson  v.  Colema?i,  4  M.  &  G.  209;  Smith  v.  Chester,  1  D. 
&  E.  R.  655;  Bass  V.  Clive,  4  ISI.  &  S.  15;  Bank  of  Commerce  v. 
Union  Bank,  3  Comstock,  230;  Goddard  x .  Merchants'  Bank,  4  Com- 
stock,  149;   Canal  Bank  \.  Bank  of  Albany,  i  Hill,  287.) 

Cases  have  been  distinguished  from  Price  v.  Neal,  and  its  applica- 
bility to  a  transfer  of  a  forged  instrument,  between  persons  not 
parties  to  it,  has  not  been  extended  to  forgeries  of  indorsements  or 
handwriting  of  parties  to  negotiable  instruments,  other  than  the 
drawer.  But,  as  applied  to  the  case  of  a  bill  to  which  the  signature 
of  the  drawer  is  forged,  accepted  or  paid  by  the  drawee,  its  authority 
has  been  uniformly  and  fully  sustained,  and  the  rule  extends  as  well 
to  the  case  of  a  bill  paid  upon  presentment,  as  to  one  accepted  and 
afterward  paid.  i^Bank  of  St.  Albans  v.  Farmers'  d^  M.  Bank,  10 
Vermont,  141;  Levy  v.  Bank  of  the  U.  S.,  4  Dallas,  234;  Bank  of 
U.  S.  V.  Bank  of  Georgia,  10  Wheat.  333;  Yon/ig  x.  Adams,  6  Mass. 
182;   Gloucester  Bank  v.  Bank  of  Salem,  17  Mass.  41.) 

A  rule  so  well  established,  and  so  firmly  rooted  and  grounded  in 
the  jurisprudence  of  the  country,  ought  not  to  be  overruled  or  dis- 
regarded. It  has  become  a  rule  of  right  and  of  action  among  commer- 
cial and  business  men,  and  any  interference  with  it  would  be 
mischievous.  Judge  Ruggles  in  Goddard  x.  Merchants'  Ba/ik  [supra), 
well  says,  "  it  should  not  be  departed  from  or  frittered  away  by  ex- 
ceptions resting  on  slight  grounds,  and  cannot  be  overruled,  without 
overthrowing  valuable  and  well-settled  principles  of  commercial 
law." 

In  the  first  above  entitled  action,  the  judgment  of  the  General  Term 
should  be  reversed,  and  that  of  the  Special  Term  afiirmed,  and 
judgment  absolute  for  the  defendant  with  costs;  and  in  the  other, 
the  judgment  of  the  General  and  Special  Term  should  be  reversed, 
and  judgment  for  the  defendant  with  costs. 

All  concur;  Peckham,  J.,  not  voting. 

Judgment  accordingly.' 

'  In  the  case  of  a  bill  payable  to  drawer's  order  the  acceptor  admits  the  capac- 
ity of  the  drawer  to  draw  and  to  indorse;  he  admits  the  genuineness  of  the  sig- 
nature  as  drawer,    but,    it   seems,    not   the   genuineness   of    the    signature   as 


II.]  ACCEPTOR.  451 

§  112  HEUERTEMATTE  v.  MORRIS.  [§  62] 

loi  New  York,  63.  —  18S5. 

This  action  was  brought  upon  defendant's  acceptance  of  a  bill  of 
exchange  drawn  upon  him  at  ninety  days  by  Ran  Runnels  of  Rivas, 
in  the  State  of  Nicaragua,  payable  to  the  order  of  Hourquet  &  Poylo 
and  by  them  indorsed  before  acceptance  to  plaintiffs,  who  obtained 
defendant's  acceptance. 

Defendants  offered  to  show  that  the  acceptance  was  made  without 
consideration  and  was  induced  by  fraudulent  representations  on  the 
part  of  the  drawer;  this  was  objected  to  and  excluded.  Judgment 
for  plaintiff  at  trial.  Judgment  reversed  at  General  Term  (28  Hun, 
77).'     Plaintiff  appeals. 

[Reported  herein  at  f.  336.] 

indorser.  Braithwaite  v.  Gardiner,  8  Q.  B.  473;  Smith  v.  Marsaek,  6  C.  B.  4S6, 
18  L.  J.  C.  P.  65;  Halifax  v.  Lyle,  3  Exch.  446;  Beeman  v.  Diuk,  11  M.  &  W. 
251;  Garland  \.  Jacomb,  L.  R.  8  Exch.  216.  See  Bills  of  Exchange  Act,  §  54, 
subsec.  2  {b).  In  like  manner  he  admits  the  authority  of  an  agent  to  draw,  but 
not  his  authority  to  indorse.     Robinson  v.  Yarrow,  7  Taunt.  455. 

The  acceptor  does  not  admit  the  genuineness  of  the  body  of  the  bill.  Hence 
if  it  has  been  raised  he  is  not  bound  on  his  acceptance,  and  if  he  has  paid  a 
raised  bill  or  check,  he  may  recover  the  money.  Marine  X.  B.v.  Mat.  City 
Bk.,  59  N.  Y.  67;  White  \.  Continental  Bk.,  64  N.  Y.  316;  Redington  v.  Woods,  45 
Cal.  406.  But  see  Ward  v.  Allen,  2  Met.  (Mass.)  53.  He  is  not  under  a  duty 
to  take  precautions  against  subsequent  fraudulent  alterations;  it  is  the  drawer 
who  has  control  over  its  form.  Scholfield  v.  Londesboroiigh,  iSg6,  A.  C. 
514. —  Ed. 

'  "  The  acceptance  was  a  new  contract  between  the  plaintiffs  and  the  defend- 
ant, based,  of  course,  upon  the  supposition  that  the  defendant  was  indebted  to 
the  drawer  in  the  amount  of  the  bill,  or  had  sufficient  money  of  the  drawer  in 
his  hands  to  meet  the  same.  If,  in  point  of  fact,  that  supposition  was  wholly 
unfounded  and  he  was  induced  by  misrepresentations  of  the  drawer  to  make 
the  acceptance,  his  liability,  in  the  absence  of  all  consideration  for  accepting 
the  bill,  is  no  greater  than  that  which  Runnels  himself  could  have  enforced, 
except  as  between  him  and  some  bona  fide  holder  for  value.  The  plaintiffs  did 
not  occupy  that  position,  they  having  parted  with  nothing  of  value  for  the 
acceptance  itself."     s.  c.  at  General  Term,  28  Hun,  77.  —  Ed. 


452  LIABILITY    OF    PARTIES.  [ART.  VI. 

III.  Drawer:  secondary,  conditional  liability. 

I.  Conditions:    Presentment;   Notice;  Protest. 
[See  Art.  Vii,  Viii,  Xui,j>os/.] 

2.   Admissions  as  to  Payee. 

§  III  GREY  V.  COOPER.  [§  6l] 

3  Douglas  (K.  B.),  65.  —  17S2. 

Action  against  drawer  by  indorsee.  Plea,  that  the  payee-indorser 
at  the  time  of  his  indorsement  was  an  infant.      Demurrer. 

Lord  Mansfield.  —  The  ground  on  which  the  drawer  is  charged 
is  that  he  drew  a  bill  by  which  he  engaged  to  pay  according  to  the 
order  of  the  payee,  whoever  that  payee  might  be.  He  might  give 
the  infant  an  authority  which  the  law  itself  does  not  give  him.  In 
the  same  manner  he  may  give  a  bill  to  his  own  wife.  The  drawer 
says,  "  Let  anybody  trust  the  payee  on  my  credit."  The  acts  of  an 
infant  are  void  or  not,  accordingly  as  they  are  for  his  benefit.  The 
privilege  of  an  infant  is  personal,  and  there  is  no  question  here  as 
between  the  infant  and  another  person.  The  infant  sets  up  no 
claim,  and  the  drawer  is  liable  to  pay. 

Judgment  for  the  plaintiff. 


IV.  Seller:  warranties. 

1.   Instrument  Genuine  and  What  it  Purports  to  Be. 

§  115  MEYER  V.  RICHARDS.  [§  65] 

163  United  States,  3S5.  —  1896. 

Action  to  recover  back  the  purchase  price  of  thirteen  bonds  of 
the  State  of  Louisiana,  payable  to  bearer,  sold  by  defendant  to  plain- 
tiff, and  afterwards  discovered  to  have  been  issued  without  authority 
of  law  and  declared  by  the  Constitution  of  the  State  to  be  null  and 
void.  The  bonds  were  in  the  State  treasury  for  cancellation  and 
were  fraudulently  issued  by  the  State  treasurer,  who  put  them  on 
the  market  surreptitiously  and  without  authority.  The  signatures 
and  seal  were  genuine.      Judgment  for  defendant. 

Mr.  Justice  White,  after  stating  the  case,  delivered  the  opinion 
of  the  court. 

We  will  .  .  .  consider  the  case  upon  the  theory  that  the  only 
warranty,  if  any,  is  one  to  be  implied  from  the  nature  of  the  contract. 


IV.]  SELLER:   WARRANTIES.  453 

It  is  obvious  from  the  facts  just  detailed  tliat  the  thirteen  bonds 
which  were  sold  by  the  defendant  in  error  to  the  plaintiff  in  error 
were  at  the  time  of  the  sale  absolutely  void.  The  twelve  which 
originally  belonged  to  the  two  college  funds  were  in  express  terms 
declared  by  the  Constitution  of  the  State  to  be  "  null  and  void,"  and 
the  General  Assembly  was  forbidden  to  make  any  provision  "  for 
their  payment,"  and  they  were  ordered  to  be  "destroyed  in  such 
manner  as  the  General  Assembly  may  direct."  This  provision  of 
the  Constitution  was  in  existence  while  the  bonds  were  in  the  hands 
of  the  State,  and  before  they  were  fraudulently  and  surreptitiously 
sold.  Indeed,  these  bonds  were  never  lawfully  put  into  circulation, 
because,  having  been  originally  issued  to  represent  trust  funds 
belonging  to  the  State,  they  were  held  by  officers  of  the  State  for  its 
account.  The  remaining  bond  was  also  void  under  the  Constitution 
of  the  State,  since  it  had  been,  under  the  express  terms  of  that 
instrument,  surrendered  to  the  State  treasurer  for  cancellation  and 
another  bond  issued  in  its  stead. 

The  bonds  were  undoubtedly  sold  by  the  defendant  in  error  as 
lawful  obligations  of  the  State.  Both  parties  to  the  contract  of  sale 
so  considered.  The  pleading  and  the  statement  of  facts  leave  no 
question  on  this  subject.  The  controversy  here  presented  is  wholly 
between  the  vendor  and  vendee  as  to  the  nature  and  extent  of 
the  obligation  of  warranty  resulting  from  the  sale.  We  are  there- 
fore not  concerned  with  whether  the  defendant  at  the  time  of  the 
sale  stood  in  the  attitude  of  a  third  holder  of  negotiable  paper  for 
value  before  maturity.  Even  if  he  were  in  such  a  condition,  and  at 
the  time  of  the  sale  there  was  a  constitutional  provision  which 
rendered  the  bonds  void  and  incapable  of  enforcement,  it  is  clear 
that  the  delivery  by  the  vendor  to  the  vendee  of  bonds  stricken  with 
constitutional  nullity  was  not  the  delivery  of  an  existing  obligation 
within  the  meaning  of  the  contract  if  it  imported  a  warranty  of  the 
existence  of  the  bonds  which  it  covered.  The  admission  being  that 
both  parties  contemplated  the  delivery  of  valid  obligations,  bonds 
of  that  character  being  outstanding,  if  warranty  of  existence  was 
implied  by  law,  such  purpose  was  not  fulfilled  by  the  delivery  of  a 
mere  equity,  which  one  of  the  parties,  the  seller,  claims  was  existing 
in  his  behalf.  Valid  bonds,  and  not  the  mere  claim  by  the  seller  to 
enforce  invalid  bonds,  was  the  object  of  the  contract.  This  is 
especially  true  in  view  of  the  fact  just  referred  to,  that  at  the  date 
of  the  sale  the  Constitution  of  the  State  in  express  terms  forbade 
the  enforcement  of  twelve  of  the  bonds,  and  practically  stipulated  to 
the  same  effect  as  to  the  other. 

The    sale    was   a    Louisiana    contract.       We    must    consequently 


454  LIABILITY    OF   PARTIES.  [ART.  VI. 

determine  the  rights  and  obligations  of  the  parties  by  the  law  of  that 
State.  By  the  civil  law,  which  prevails  in  Louisiana,  warranty 
whilst  not  of  the  essence,  is  yet  of  the  nature  of  the  contract  of 
sale,  and  is,  therefore,  implied  in  every  such  contract  unless  there 
be  an  express  stipulation  to  the  contrary.  (^Bayon  v.  Vavasseur,  lo 
Martin,  6i;  Strawbn'dgew.  JVarfieid,  4  Louisiana,  20.)  The  following 
provisions  on  the  subject  of  warranty  are  found  in  the  Louisiana 
code: 

"  The  seller  is  bound  to  two  principal  obligations,  that  of  deliver}- 
and  that  of  warranting  the  thing  which  he  sells."  (C.  C.  2475.) 
"  Although  at  the  time  of  the  sale  no  stipulations  have  been  made 
respecting  the  warranty,  the  seller  is  obliged,  of  course,  to  warrant 
the  buyer  against  the  eviction  suffered  by  him  from  the  totality  or 
part  of  the  thing  sold  and  against  the  charges  claimed  on  such  thing 
which  were  not  declared  at  the  time  of  the  sale."  (C.  C.  2501.) 
"  Even  in  case  of  stipulation  of  no  warranty,  the  seller  in  case  of 
eviction  is  liable  to  a  restitution  of  the  price,  unless  the  buyer  was 
aware,  at  the  time  of  the  sale,  of  the  danger  of  the  eviction,  and 
purchased  at  his  peril  and  risk."     (C.  C.    2505.) 

These  articles  of  the  Louisiana  Civil  Code,  which  do  but  formulate 
the  principles  of  the  civil  law  as  to  warranty,  are  not  wholly  in  accord 
with  the  doctrines  of  the  common  law.  The  distinction  between  the 
two  systems  may  be  briefly  summed  up  by  saying  that  the  one,  the 
civil-law  doctrine,  finds  its  expression  in  the  maxim  caveat  venditor^ 
whilst  the  rule  of  the  common  law  is  conveyed  by  the  aphorism 
caveat  emptor.  It  is  unnecessary  to  determine  the  scope,  under  the 
Louisiana  law,  of  the  obligation  of  warrant}-  as  to  property  generally, 
since  we  are  in  this  case  concerned  only  with  its  limit  when  arising 
from  the  sale  of  a  credit  or  other  incorporeal  right.  The  code  of 
that  State  contains  express  provisions  defining  the  extent  of  the 
obligations  arising  in  such  case: 

"  He  who  sells  a  credit  or  an  incorporeal  right,  warrants  its 
existence  at  the  time  of  the  transfer,  though  no  warranty  be  men- 
tioned in  the  deed."  (C.  C.  2646.)  "  The  seller  does  not  warrant 
the  solvency  of  the  debtor  unless  he  has  agreed  so  to  do."  '  (C.  C. 
2647.) 

These  provisions,  instead  of  causing  the  obligation  of  warranty  in 
a  sale  of  an  incorporeal  right  to  be  broader  than  in  the  case  of  tangi- 
ble property,  on  the  contrary  makes  it  narrower. 

As  then,  under  the  law  of  Louisiana,  the  seller  under  the  contract 
of  sale  was  obliged  to  warrant  the  existence  of  the  thing  sold,  the 
case  of  the  defendant  in  error  involves  the  practical  contention  that 
a  bond  which  at  the  time  of  the  sale  was  declared  by  the  Constitu- 


'  See  Broivn  v.  Montgomery,  20  N.  Y.  287,  post,  p.  469.  —  Ed. 


IV.]  SELLER:    WARRANTIES.  45$ 

tion  of  the  State  to  be  non-existing,  is  yet  for  the  purposes  of  the 
sale  to  be  treated  as  an  existing  obligation.  This  proposition  is  an 
obvious  contradiction  in  terms,  and  of  course  refutes  itself.  [Citing 
authorities  from  Louisiana  and  French  courts.] 

Of  course,  this  warranty  of  existence,  as  established  by  the  law  of 
Louisiana  and  as  found  in  France  and  other  civil-law  countries, 
does  not  govern  a  contract  of  sale  when  the  object  contemplated  by 
a  sale  is  a  thing  whether  existing  or  not  existing;  in  other  words» 
where  the  parties  buy,  not  an  existing  obligation,  but  the  chance  of 
there  being  one.  This  is  illustrated  by  Knight  v.  Lanfear  (7  Rob. 
[La.]  172),  where  the  court,  per  Martin,  J.,  said,  in  speaking  of  the 
thing  sold:  "  Whatever  may  be  its  value,  if  it  be  not  in  substance 
what  the  purchaser  believed  he  was  receiving,  his  error  must  invali- 
date the  sale,  because  it  prevented  his  consent;  no7i  videtur,  qui  err  at, 
co/isentirey  And,  in  speaking  of  a  sale  of  doubtful  or  non-existing 
things,  this  great  judge  said :  "  This  claim,  was  a  fair  object  of  sale  if 
its  nature  had  been  disclosed,  but  that  was  concealed  and  was 
probably  unknown  to  them,  and  what  was  offered  for  sale  was 
something  quite  different  from  this  claim."  The  same  distinction 
has  been  considered  and  applied  by  the  courts  of  France.  {Dulac  c. 
Cliiscl  et  Cie.,  Lyons,  Nov.  30,  1849,  Journal  du  Palais,  i,  1852,  32.) 

The  defendant  in  error  does  not  dispute  that  the  foregoing  princi- 
ples exist  in  and  are  controlling  under  the  Louisiana  law,  under  the 
law  of  France,  and  also  under  the  civil  law  generally  from  which  the 
law  of  Louisiana  is  derived.  But  whilst  thus  admitting,  he  denies 
that  the  contract  of  sale,  involved  in  this  case,  was  governed  either 
by  the  Louisiana  code  or  the  general  principles  of  the  civil  law. 
This  proposition  rests  on  the  contention  that  when  the  Civil  Code 
of  Louisiana  was  compiled,  its  framers  contemplated  the  simultane- 
ous enactment  of  a  Commercial  Code  which  was  then  drafted,  and 
therefore  omitted  from  the  former  Code  the  necessary  provisions  to 
govern  commercial  contracts,  under  the  hypothesis  that  the  latter 
would  also  be  enacted;  that  in  consequence  of  the  failure  to  adopt 
the  Commercial  Code,  the  courts  of  Louisiana  have  held  that  cases 
arising  under  the  law  merchant  are  governed  by  that  law  in  the 
absence  of  an  express  statutory  requirement  to  the  contrary.  From 
this  premise  the  conclusion  is  drawn  that  as  the  contract  in  question 
involved  the  sale  of  negotiable  bonds,  the  obligations  resulting  from 
the  sale  are  commercial  in  their  nature,  and  are  controlled  by  the 
law  merchant,  by  which  it  is  asserted  the  vendor  in  such  a  case, 
when  selling  in  good  faith,  warrants  only  that  the  signatures  to  the 
paper  sold  are  not  forgeries.  In  a  restricted  sense  the  part  of  the 
proposition    relating    to    the    operation    of    the   law    merchant,    in 


456  LIABILITY   TO    PARTIES.  [ART.  VI. 

the  State  of  Louisiana,  is  well  founded.  [Harrod  v.  Lafayre,  12 
Martin,  29;  JVagncr  v.  Kciwer,  2  Rob.  La.  122;  Barry  v.  Insurance 
Co.,  12  Martin,  498;  McDonald  v.  Milloudon,  5  Louisiana,  403.) 
Whilst  this  is  true,  the  contention  is  yet  erroneous  in  a  twofold 
sense;  first,  in  presupposing  that  a  mere  contract  of  sale  of  com- 
mercial paper,  without  recourse,  is  governed  as  to  the  obligations, 
between  the  vendor  and  vendee,  by  the  law  merchant;  second,  in 
assuming  that  in  such  a  sale,  either  under  the  principles  of  the  civil 
law  or  what  the  argument  presumes  to  be  the  law  merchant,  the  only 
warranty  resting  upon  the  vendor  is  that  of  the  genuineness  of  the 
signatures  to  the  paper  sold.  [Citing  authorities  from  Louisiana 
and  French  courts.] 

None  of  the  authorities  referred  to  by  counsel  for  defendant  in 
error  sustain  the  proposition  heretofore  stated  with  reference  to  the 
supposed  existence  and  applicability  of  the  law  merchant,  and  the 
results  which  it  is  claimed  flow  therefrom.  On  the  contrary,  both 
in  England  and  in  the  United  States  the  doctrine  is  universally 
recognized  that  where  commercial  paper  is  sold  without  indorsement 
or  without  express  assumption  of  liability  on  the  paper  itself,  the 
contract  of  sale  and  the  obligations  which  arise  from  it,  as  between 
vendor  and  vendee,  are  governed  by  the  common  law,  relating  to 
the  sale  of  goods  and  chattels.  So,  also,  the  undoubted  rule  is  that 
in  such  a  sale  the  obligation  of  the  vendor  is  not  restricted  to  the 
mere  question  of  forgery  vcl  non,  but  depends  upon  v/hether  he  has 
delivered  that  which  he  contracted  to  sell,  this  rule  being  designated, 
in  England,  as  a  condition  of  the  principal  contract,  as  to  the  essence 
and  substance  of  the  thing  agreed  to  be  sold,  and  in  this  country 
being  generally  termed  an  implied  warranty  of  identity  of  the  thing 
sold. 

Benjamin  on  Sales  (4th  Am.  ed.,  sec.  600),  says: 

"  When  the  vendor  sells  an  article  by  a  particular  description,  it 
is  a  condition  precedent  to  his  right  of  action  "  [to  recover  the  price 
agreed  to  be  paid  by  the  vendee]  "  that  the  thing  which  he  offers  to 
deliver,  or  has  delivered,  should  answer  the  description;"  [and,  in 
sec.  607,  the  author  says:]  "  Under  this  head  may  also  properly  be 
included  the  class  of  cases  in  which  it  has  been  held  that  the  vendor 
who  sells  bills  of  exchange,  notes,  shares,  certificates  and  other 
securities,  is  bound,  not  by  the  collateral  contract  of  warranty,  but 
by  the  principal  contract  itself,  to  deliver  as  a  condition  precedent 
that  which  is  genuine,  not  that  which  is  false,  counterfeit  or  not 
marketable  by  the  name  or  denomination  used  in  describing  it." 

It  is  upon  this  general  principle  of  the  common  law,  not  upon  any 
peculiar  doctrine  of  commercial  law,  that  the  cases  in  the  common 
law  courts  proceed.    [Discussing  yonesv.  Ryde,  5  Taunt.  488;  Fetins 


IV.]  SELLER:   WARRANTIES.  457 

V.  Harrison,  3  T.  R.  757;  Wilkinson  v.  Johnson,  3  B.  &  C.  42S; 
Young  V.  Cole,  3  Bing.  N.  C.  724;  Lanicrt  v.  Heath,  15  M.  &  W.  486; 
Gompcrtz  V.  Bartlett,  2   El.  &.  BL  849;   Gurney  v.  ?F^7«^r.f/^;',  4  El.  & 

Bl.  I33.J 

The  cases  in  the  American  courts,  whilst  declaring  the  same  rule 
as  that  recognized  in  England,  place  it  upon  a  theoretical  basis 
differing  somewhat  from  that  pronounced  by  the  English  courts; 
that  is,  instead  of  pronouncing  it  a  condition  of  the  principal  con- 
tract that  the  thing  sold,  in  its  essence  and  substance,  must  be 
delivered,  declare  that  there  is  an  implied  warranty  of  identity,  or, 
in  other  words,  that  the  thing  sold  is  what  it  purports  to  be.  Daniel, 
in  his  treatise  on  Negotiable  Paper  (§  733^;),  calls  attention  to  the 
different  definitions  given  to  the  same  obligation  by  the  American 
and  English  courts,  and  indicates  the  view  that  the  form  of  expression 
used  by  Benjamin  in  the  passage  already  quoted  is  the  more  accurate 
one. 

Aside,  however,  from  the  mere  garb  in  which  the  thought  is 
clothed,  the  American  and  English  courts  are  in  full  accord.  This 
is  shown  by  the  case  of  Utley  v.  Donaldson  (94  U.  S.  29,  45),  where 
Benjamin  on  Sales  is  approvingly  referred  to,  as  also  Flynn  v.  Allen 
(57  Penn.  St.  482),  and  Webb  v.  Odell  (49  N.  Y.  583),  both  of  which 
cases,  as  also  the  line  of  American  adjudications  which  enforce  the 
same  doctrine,  are  noted  in  the  margin  of  this  opinion.' 

Many  of  the  controversies  covered  by  the  cases  referred  to  arose  in 
consequence  of  the  sale  of  a  forged  note,  but  the  principles  upon 
which  all  the  authorities  proceed  do  not  confine  the  right  of  recovery 
to  such  a  case,  but  rest  upon  the  general  doctrine  to  which  we  have 
already  referred.  In  fact,  no  case  is  reported  wherein  the  obligation, 
as  between  vendor  and  vendee,  in  the  sale  of  negotiable  paper,  is 
claimed  to  be  controlled  other  than  by  the  general  principles  of  the 
common  law,  though  in  three  cases,  Baxter  v.  Diiren  (29  Maine, 
434);   Fisher   v.    Rieman   (12   Maryland,    497);    and   Ellis  x.  JVild   (6 

»  T/ii-all  V.  Newell,  19  Vt.  202;  Lyons  v.  Miller,  6  Gratl.  427;  Aldrick  v.  Jack- 
son,  5  R.  I.  218;  Barton  v.  Trent,  3  Head,  167;  Delaware  Bank  v.  Jarvis,  20 
N.  Y.  226;  Merriam  v.  VVolcott,  3  Allen,  258;  Bell  v.  Cafferty,  21  Ind.  411; 
Swanzey  v.  Parker,  50  Penn.  St.  441;  Morrison  v.  Lovell,  4  W.  Va.  346;  Webb  v. 
Odell,  49  N.  Y.  583;  Worthingion  v.  Cowles,  112  Mass.  30;  Snyder  v.  Reno,  38 
Iowa,  329;  Giffert  v.  West,  33  Wis.  617,  37  Wis.  115;  Ilannwn  v.  Richardson,  48 
Vt.  508;  Ilussey  v.  Sibley,  66  Me.  192;  Hurst  v.  Chambers,  12  Bush  (Ky.)  155; 
Allen  V.  Clark,  49  Vt.  390;  Bankhead  \ .  Oiuen,  60  Ala.  457;  Smith  v.  McMair,  19 
Kans.  330;  Challiss  v.  McCrum,  22  Kans.  157;  Rogers  v.  Walsh,  12  Neb.  28; 
Milliken  V.  Chapman,  75  Me.  306;  Daskam  v.  Ullman,  74  Wis.  474;  Palmer  v. 
Courtney,  32  Neb.  773;  Ware  v.  McCormack,  96  Ky.  139.  28  S.  W.  Rep.  157; 
Brown  v.  Ames,  59  Minn.  476,  61  N.  W.  448. 


458  LIABILITY    OF    PARTIES.  [ART.  VI. 

Mass.  321),  the  deduction  was  made  from  the  law  respecting  the 
sale  of  goods  that  on  a  sale  of  negotiable  paper  there  was  under  the 
principle  of  caveat  emptor  no  implied  warranty  even  that  the  signa- 
tures to  the  paper  were  not  forged.  EI/i's  v.  IVihi  was,  however, 
expressly  overruled  in  Jf err/am  x.  IVo/cott  (3  Allen,  25S,  260);  and 
from  the  allusions  to  Baxter  v.  Duren,  contained  in  the  later  Maine 
decisions  previously  noted  in  the  margin,  it  is  doubtful  whether  the 
early  ruling  in  Maine  would  now  be  followed  there.  The  three 
cases  referred  to,  it  is  needless  to  say,  are  practically  disregarded  by 
the  entire  current  of  American  and  English  authority,  and  stand 
alone.  They  are  disavowed  by  the  defendant  in  error  here,  since 
his  argument  admits  that  there  is  a  warranty  of  the  genuineness  of 
the  signatures  to  an  apparent  negotiable  instrument,  thereby  con- 
ceding the  subsistence  of  the  obligation  to  warrant  the  existence  or 
identity  of  the  thing  sold,  and  yet  seeking  to  avoid  its  consequences 
by  limiting  it  to  non-existence  resulting  from  a  particular  nullity. 

There  is  an  exceptional  case  [Littaiicr  v.  Goldman,  72  N.  Y.  506,  — 
1878),  which  holds  that  the  common-law  obligation,  as  to  the  implied 
warranty  of  identity  in  the  thing  sold,  in  the  case  of  commercial 
paper,  extends  only  to  the  genuineness  of  the  instrument.  The  case 
was  one  involving  the  nullity  of  a  usurious  note,  and,  if  correctly 
decided,  would  be  authority  for  the  proposition  that  there  was  a 
peculiar  species  of  warranty  in  the  sale  of  commercial  paper,  differ- 
ing from  all  others;  in  other  words,  that  there  was  a  law  merchant 
of  warranty  where  there  was  no  commercial  contract.  The  opinion 
in  this  case  illustrates  the  same  contradictory  position  presented 
here  by  the  argument  of  the  defendant  in  error,  to  which  we  have 
just  called  attention,  that  is,  that  it  admits  the  common  law-rule  and 
then  denies  its  essential  result  by  eliminating  conditions  of  non- 
existence which  are  necessarily  embraced  by  it.  It  follows  that  this 
New  York  decision  leads  logically  to  the  view  expressed  in  the 
Maine  and  Maryland  cases  just  referred  to,  for  either  the  principle 
of  warranty  of  identity  must  be  accepted  or  rejected;  it  cannot  be 
accepted  and  its  legitimate  and  inevitable  results  be  denied.  The 
rule  there  announced  was  in  conflict  with  previous  decisions  in  New 
York,  and  the  decision  is  strongly  criticised  by  the  Court  of  Errors 
and  Appeals  of  New  Jersey  in  JVoodx.  S/ic/do/i  (42  N.  J.  L.  421,  425). 

In  Giffert  v.  West  (33  Wisconsin,  617,  —  1873),  where  a  note  was 
sold  which  was  void  for  usury,  the  vendee  was  allowed  to  recover 
the  consideration  paid  by  him,  and  his  right  to  do  so  was  based 
upon  the  general  doctrine  that  one  making  a  sale  is  bound  as  a  con- 
dition of  the  principal  contract  to  an  implied  warranty  of  the  exist- 
ence of  the  thing  sold. 


IV.]  SELLER:    WARRANTIES.  459 

In  Hannum  v.  Richardson  (48  Vermont,  50S,  —  1875),  a  very  clear 
statement  of  the  doctrine  is  found.  There  an  indorser  sold  a  nego- 
tiable promissory  note  without  recourse.  The  note  had  been  given 
for  intoxicating  liquors  sold  in  Vermont  in  violation  of  law,  and  on 
that  account  was  void  at  its  inception.  It  was  claimed  that  the 
defendant  knew  of  the  invalidity  of  the  note  when  he  transferred  it. 
The  court,  however,  held  that  knowledge  on  the  part  of  the  seller 
was  not  necessary  to  fix  his  liability,  saying  (p.  510): 

"  By  indorsing  the  note  '  without  recourse,'  the  defendant  refused 
to  assume  the  responsibility  and  liability  which  the  law  attaches  to 
an  unqualified  indorsement,  so  that,  in  respect  to  such  liability,  it 
may  perhaps  be  regarded  as  standing  without  an  indorsement.  If 
it  be  so  regarded,  then  in  what  position  do  these  parties  stand  in 
respect  to  the  transaction?  The  principle  is  well  settled,  that  where 
personal  property  of  any  kind  is  sold,  there  is  on  the  part  of  the 
seller  an  implied  warranty  that  he  has  title  to  the  property,  and  that 
it  is  what  it  purports  to  be,  and  is  that  for  which  it  was  sold,  as 
understood  by  the  parties  at  the  time,  and  in  such  case  knowledge 
on  the  part  of  the  seller  is  not  necessary  to  his  liability." 

On  p.  511  the  court  further  observed: 

"  The  note  in  question  was  not  a  note,  it  was  not  what  it  pur- 
ported to  be,  or  what  it  was  sold  and  purchased  for;  it  is  of  no  more 
effect  than  if  it  had  been  a  blank  piece  of  paper  for  which  the  plain- 
tiff had  paid  his  fifty  dollars.  In  this  view  of  the  case  we  think  the 
defendant  is  liable  upon  a  warranty  that  the  thing  sold  was  a  valid 
note  of  hand." 

Nor  is  there  any  foundation  for  the  assertion  that  Otis  v.  Cidliim 
(92  U.  S.  447),  and  the  cases  of  Orleans  v.  Piatt  (99  U.  S.  676),  and 
^tna  Life  Ins.  Co.  v.  Middleport  (124  U.  S.  534),  both  of  which  cite 
Otis\.  Ciillnm,  support  the  doctrme  that  a  sale  of  commercial  paper 
without  recourse  is  not,  as  between  the  vendor  and  vendee,  gov- 
erned by  the  ordinary  rule  of  the  common  law.  On  the  contrary, 
that  case  expressly  rested  its  conclusion  on  the  decision  in  Lainert 
v.  Heath,  supra,  which  latter  case,  as  we  have  seen,  whilst  enforcing 
the  principles  of  the  common  law,  considered  that  under  the  particu- 
lar facts  there  presented  it  was  a  question  for  the  jury  to  determine 
whether  the  scrip  delivered  was  the  kind  of  scrip  which  the  defend- 
ant had  ordered  purchased.  That  case  not  only,  as  has  already  been 
stated,  concerned  non-negotiable  paper,  but  its  decision  involved  no 
question  of  the  scope  of  the  warranty,  but  solely  what  was  the  thing 
bought.  Nor  does  the  case  of  Otis  v.  Cullum  justify  the  assumption 
that  this  court  laid  down  the  rule  that  a  mere  sale  of  commercial 
paper,  as  between  vendor  and  vendee,  when  the  sale  was  made  with- 
out recourse,  created  some  peculiar  and  exceptional  warranty  to  be 
considered  in  this  particular  as  the  law  merchant.     It  is  true  that  in 


460  LIABILITY    OF   PARTIES.  [ART.   VI 

expressing  the  general  doctrine  Mr.  Justice  S\va3'ne  said:  "  The 
seller  is  liable  ex  delicto  for  bad  faith,  and  ex  co>?tractu  there  is  an 
implied  warranty  on  his  part  that  they  belong  to  him  and  are  not 
forgeries.  Where  there  is  no  express  stipulation  there  is  no  liability 
beyond  this."  But  in  using  this  language,  as  to  the  extent  of  the 
warranty,  the  mind  was  directed  to  that  form  of  non-existence  which 
more  commonly  obtains,  and  the  expression  is  a  mere  illustration  of 
the  rule  de  eo  quod ple7-iimque  fit.  If  this  were  a  case  where  a  vendee 
claimed  to  recover  back  the  price  paid  by  him  on  a  purchase  of 
negotiable  securities,  which  pass  by  delivery  from  hand  to  hand,  on 
the  averment  that  after  the  sale  it  had  developed  that  they  were  not 
valid  (although  not  forgeries),  because  the  law  under  which  they 
had  been  issued  was  constitutionally  void  or  ultra  vires.,  the  claim  of 
implied  warranty  of  existence  would  be  without  merit,  for  the 
reason  that  such  a  state  of  fact  would  present  a  case  of  a  sale  of 
securities  whether  valid  or  invalid,  hence  engendering  no  implica- 
tion of  warranty  of  existence.  Under  the  state  of  facts  thus  sup- 
posed, the  purpose  of  the  parties  to  make  a  contract  of  that  nature 
would  legally  result  from  the  fact  that  they  were  both  necessarily 
equally  chargeable  with  notice  of  want  of  power,  and  therefore 
would  be  both  presumed  to  have  acted  with  reference  to  such  knowl- 
edge. This  is  Otis  v.  Culluin.  But  it  is  not  the  case  at  bar,  since  it 
is  here  admitted  that  both  parties,  in  entering  into  the  contract  of 
sale,  contemplated  valid  securities,  of  which  there  were  many  out- 
standing, and  those  delivered  were  void,  not  because  of  a  want  of 
power  to  enact  the  law  under  which  they  were  issued,  or  because 
they  were  ultra  vires  for  some  other  legal  cause,  but  because  they 
were  stricken  with  nullity  by  a  constitutional  provision  adopted  after 
the  act  authorizing  the  issue  of  the  securities,  and  where  nothing  on 
the  face  of  the  bonds  indicated  that  they  were  illegal.  The  dis- 
tinction pointed  out  by  the  foregoing  statement  not  only  illustrates 
the  correctness  of  the  decision  in  Otis  v.  Cullu/n,  but  also  demon- 
strates the  error  of  attempting  to  extend  it  to  the  state  of  facts  pre- 
sented in  the  case  under  consideration.  Indeed,  in  examining  and 
applying  Otis  v.  Cullum  the  fact  that  it  does  not  control  a  case  like 
this  has  been  recognized.  (Daniel,  Neg.  Inst.,  §  734^;  Rogers  v. 
Walsh.,  supra;  Cincinnati.,  New  Orleans.,  etc.,  Railway  v.  Citizens' 
National  Bank,  24  Week.  Law  Bull.  [Ohio],  198,  211.) 

The  foregoing  analysis  of  the  principles  and  review  of  the  authori- 
ties governing  the  law  of  sale  of  negotiable  paper,  transferred  with- 
out recourse,  as  between  vendor  and  vendee,  clearly  demonstrates 
the  unsoundness  of  the  positions  upon  which  the  defendant  in  error 
relies,  since   it   affirmatively   establishes   that   there    is   no   peculiar 


IV.]  SELLER:    WARRANTIES.  4^1 

warranty,  in  a  sale  of  commercial  paper,  and  that  the  reasoning  by 
which  it  is  attempted  to  prove  its  existence  is  a  mere  misconception 
of  the  principles  of  the  common  law  relatmg  to  the  sale  of  goods 
and  chattels. 

In  passing,  however,  it  is  worthy  of  note  that  whilst  the  civil  law 
enforces  in  the  contract  of  sale  generally  the  broadest  obligation  of 
warranty,  it  has  so  narrowed  it,  when  dealing  with  credits  and  incor- 
poreal rights,  as  to  confine  it  to  the  title  of  the  seller  and  to  the 
existence  of  the  credit  sold,  and,  e  converso,  the  common  law,  which 
restricts  warranty  within  a  narrow  compass,  virtually  imposes  the 
same  duty  by  broadening  the  warranty  as  regards  personal  property 
so  as  to  impose  the  obligation  on  the  vendor  to  deliver  the  thing 
sold  as  a  condition  of  the  principal  contract  or  by  implication  of 
warranty  as  to  the  identity  of  the  thing  sold.  By  these  processes  of 
reasoning  the  two  great  systems,  whilst  apparently  divergent  in 
principle  practically  work  substantially  to  the  same  salutary  con- 
clusions. 

There  are  many  questions  discussed  in  the  brief  of  counsel  which 
we  do  not  notice,  and  which  we  content  ourselves  with  saying  are 
without  merit.  The  views  above  stated  are  controlling  and  decisive 
of  the  case  and  lead  necessarily  to  the  reversal  of  the  judgment. 
As  the  case  was  heard  upon  a  stipulation  waiving  a  jury  and  upon  an 
agreed  statement  of  facts,  it  is  our  duty,  in  reversing,  to  direct  that 
the  proper  judgment  be  entered  below.  {Fort  Scott  v.  Hickman,  112 
U.  S.  150,  and  cases  there  cited.) 

It  follows  that  — 

The  judgment  of  the  Circuit  Court  must  be  reversed,  and  the  case 
be  remanded  with  directions  to  enter  judgment  for  plaintiffs  for  eight 
thousand  three  hundred  and  eighty-three  dollars  and  seventy-five 
cents  ($8,383.75),  with  interest  from  judicial  demand  and  costs. 


§  115  CHALLISS  V.  McCRUM.  [§  65] 

22  Kansas,  157.  —  1879. 

Action  to  recover  damages  upon  an  implied  warranty  in  the  sale 
of  certain  notes.  Demurrer  to  the  petition  overruled.  Defendant 
appeals. 

The  opinion  of  the  court  was  delivered  by  — 

Brewer,  J.  —  On  December  4,  1871,  plaintiff  in  error  loaned  one 
Edward  A.  Ege  $250,  and  took  his  note  therefor  in  the  sum  of  $265, 
payable  to  Richard  Probasco  or  bearer,  and  secured  by  mortgage. 
Long  after  its  maturity,  and  in  1876,  several  payments  having  been 


462  LIABILITY  OF    PARTIES.  [ART.  VI. 

made  thereon  in  the  meantune,  plaintiff  in  error  sold  the  note  for 
its  then  face  value  to  defendant  in  error.  At  the  time  of  such  sale 
he  indorsed  it,  "  Without  recourse. — W.  L.  Challiss."  McCrum 
sued  on  the  note.  Ege  pleaded  usury.  The  plea  was  sustained,  and 
McCrum  recovered  $229.90,  less  than  the  face  value  of  the  note,  for 
which  sum  he  brought  this  action.  A  demurrer  to  the  petition  was 
overruled,  and  this  ruling  is  now  presented  for  review. 

Can  the  action  be  sustained?  Of  course  no  action  will  lie  on  the 
indorsement,  for  by  his  written  contract  Challis  expressly  declines 
to  assume  the  liabilities  of  an  indorser.  If  sustainable  at  all,  it 
must  be  as  against  him  as  a  vendor,  and  not  as  an  indorser,  and  upon 
the  doctrine  of  an  implied  warranty.  The  theory  of  the  defendant 
in  error  is,  that  every  vendor  of  a  bill,  bond  or  note  impliedly  war- 
rants that  it  is  what  it  purports  on  its  face  to  be  —  the  legal  obliga- 
tion of  the  parties  whose  names  appear  on  the  instrument;  and  that 
the  character  of  the  indorsement  or  the  lack  of  an  indorsement  in 
no  manner  affects  this  implied  warranty.  On  the  other  hand,  the 
counsel  for  plaintiff  in  error  lays  down  the  broad  proposition  that 
"  there  is  no  such  thing  as  implied  warranty  in  the  sale  of  chattels;  " 
and  that,  in  the  absence  of  express  warranty,  the  maxim  caveat 
emptor  is  of  universal  application.  It  is  clear  that  the  character  of 
the  indorsement  cuts  no  figure  in  the  question;  as  stated,  no  action 
will  lie  on  it.  But  further,  the  restriction  is  only  as  to  his  liability 
as  indorser,  and  in  no  manner  affects  his  relation  to  the  paper  as 
vendor.  An  unqualified  indorsement  is  the  assumption  of  a  con- 
ditional liability.  The  indorser  becomes  a  new  drawer,  and  is  liable 
on  the  default  of  the  drawee.  "  Without  recourse,"  does  away  with 
this  conditional  liability.  It  leaves  the  indorsement  simply  as  a 
transfer  of  title,  and  the  indorser  liable  only  as  vendor;  yet  it  leaves 
him  a  vendor,  and  divests  him  of  none  of  the  liabilities  of  a  vendor. 
It  makes  the  transaction  the  equivalent  of  a  delivery  of  paper  pay- 
able to  bearer,  and  transferable  by  delivery.  (^Hanuiini  v.  Richardson^ 
48  Vt.  50S.) 

Independent,  therefore,  of  any  matter  of  indorsement,  what 
implied  warranty  is  there  in  the  transfer  of  a  promissory  note?  Two 
things  are  clear  under  the  authorities:  First,  that  there  is  an 
implied  warranty  of  the  genuineness  of  the  signatures;  and,  second, 
that  there  is  no  warranty  of  the  solvency  of  the  parties.  It  is 
unnecessary  to  more  than  refer  to  a  few  of  the  authorities  upon  these 
propositions:  (Byles  on  Bills,  pp.  123,  125,  and  cases  in  notes; 
yones  V.  Ryde,  5  Taunt.  488;  Gi/rney  v.  Womersley,  4  El.  &  Bl.  132; 
Gompertz  v.  Barflett,  24  Eng.  Law  and  Eq.  156;  Terry  v.  Bisse/I,  26 
Conn.  23;  Merriam   v.   IVo/coit,  3   Allen,    259;  Aldrich   v.  Jackson,  5 


IV.]  SELLER:    WARRANTIES.  463 

R.  I.  218;  Lobdcll  V.  Baker,  3  Mete.  469;  i  Addison  on  Cont.,  p. 
152;  Ellis  V.  Wild,  6  Mass.  321;  Eagle  Bank  v.  Smith,  5  Conn.  71; 
Shaver  v.  Ehle,  16  Johns.  201;  Duinoiit  v.  Willianison,  18  Ohio  St. 
515;  2  Parsons  on  Notes  and  Bills,  ch.  2,  §  2.)  But  in  the  case  at 
bar,  the  signature  of  the  maker  was  genuine.  The  objection  is,  that 
it  was  never  his  legal  obligation  to  the  full  amount  for  which  it  pur- 
ported to  be.  How  far  is  there  any  implied  warranty  in  this  respect? 
A  reference  to  some  of  the  leading  cases  will  throw  light  upon  this 
question. 

In  Thrall  v.  Newell  (19  A"t.  203),  it  appeared  that  one  of  the 
makers  of  a  note  was  insane.  The  vendor  made  a  written  assign- 
ment, in  which  was  a  description  of  the  note,  and  the  court  construed 
this  as  an  express  warranty  that  the  instrument  was  the  legal  obliga- 
tion of  the  apparent  makers,  and  one  being  incapable  of  contracting, 
gave  judgment  against  the  vendor  on  account  of  this  breach  for  the 
amount  received  by  him.  While  the  judgment  of  the  court  is  rested 
upon  the  fact  of  an  express  warranty,  the  judge  who  writes  the 
opinion  expresses  his  individual  conviction  that  the  same  result 
would  follow  on  a  mere  transfer  without  any  express  warranty,  and 
quotes  approvingly  an  extract  from  Rand's  edition  of  Long  on  Sales, 
that  "  there  is  an  implied  warranty  in  every  sale  that  the  thing  sold 
in  that  for  which  it  was  sold." 

In  Lohdell  v.  Baker  (3  Mete.  469),  it  appeared  that  the  owner  of  a 
note  procured  the  indorsement  of  a  minor,  and  then  put  the  paper 
in  circulation.  He  was  held  liable  to  a  subsequent  holder.  Chief 
Justice  Shaw,  delivering  the  opinion  of  the  court,  says: 

"  Whoever  takes  a  negotiable  security  is  understood  to  ascertain 
for  himself  the  ability  of  the  contracting  parties,  but  he  has  a  right 
to  believe,  without  inquiring,  that  he  has  the  legal  obligation  of  the 
contracting  parties  appearing  on  the  bill  or  note.  Unexplained,  the 
purchaser  of  such  a  note  has  a  right  to  believe,  upon  the  faith  of 
the  security  itself,  that  it  is  indorsed  by  one  capable  of  binding  him- 
self by  the  contract  which  an  indorsement  by  law  imports." 

In  Hannuiii  v.  Biehardsou  (48  Vt.  508),  a  note  was  given  for  liquor 
sold  in  violation  of  law,  and  was  by  statute  void.  Defendant  knew 
its  invalidity,  transferred  it  by  an  indorsement  without  recourse,  and 
he  was  held  liable  to  his  vendee. 

In  Dclazuare  Bank  v.  yarvis  (20  N.  Y.  226),  a  usurious  note  was 
sold,  and  the  vendor  was  adjudged  liable,  not  merely  for  the  money 
received  by  him,  but  also  the  costs  paid  by  his  vendee  in  a  suit 
against  the  makers  of  the  note.  In  the  opinion,  Mr.  Justice  Corn- 
stock  uses  this  language: 

"  The  authorities  state  the  doctrine  in  general  terms  that  the 
vendor  of  a  chose  in   action,  in  the  absence  of  express  stipulation, 


464  LIABILITY    OF   PARTIES.  [ART.  VI. 

impliedly  warrants  its  legal  soundness  and  validity.  In  peculiar  cir- 
cumstances and  relations,  the  law  may  not  impute  to  him  an  engage- 
ment of  this  sort.  But  if  there  are  exceptions,  they  certainly  do 
not  exist  where  the  invalidity  of  the  debt  or  security  sold  arises  out 
of  the  vendor's  own  dealing  with  or  relation  to  it.  In  this  case,  the 
defendant  held  a  promissory  note  which  was  void,  because  he  had 
himself  taken  it  in  violation  of  the  statutes  of  usury.  When  he  sold 
the  note  to  the  plaintiffs  and  received  the  cash  therefor,  by  that 
very  act  he  affirmed  in  judgment  of  law  that  the  instrument  was 
unattainted  so  far  at  least  as  he  had  been  connected  with  its 
origin."  ' 

In  Young  v.  Cole  (3  Bingham  N.  C.  724),  certain  bonds  were  sold 
as  Guatemala  bonds,  which  turned  out  afterward  to  be  lacking  the 
requisite  seal,  and  the  vendor,  though  ignorant  of  the  defect  and 
innocent  of  wrong,  was  compelled  to  refund  the  money.  The  thing 
in  fact  sold  was  not  the  thing  supposed  and  intended  to  be  sold. 

In  Gompertz  v.  Bartlett  (24  Eng.  Law  and  Eq.  156),  the  plaintiff 
discounted  for  the  defendant  an  unstamped  bill,  purporting  on  its 
face  to  have  been  a  foreign  bill,  drawn  at  Sierre  Leone  and  accepted 
in  London,  but  which  was  in  fact  drawn  in  London.  If  actually  a 
foreign  bill,  it  required  no  stamp,  and  was  valid;  but  being  an  inland 
bill,  it  required  a  stamp  to  make  it  a  valid  bill  in  a  court  of  law. 
The  acceptance  was  genuine,  and  the  acceptor  had  previously  paid 
similar  bills.  But  the  acceptor  becoming  bankrupt,  the  commis- 
sioner refused  to  allow  it  against  his  estate  because  not  stamped. 
Thereupon  the  plaintiff,  who  had  sold  the  bill  and  been  compelled 
to  take  it  up,  brought  his  action  to  recover  the  price  he  had  paid 
for  it,  and  the  action  was  sustained.  Lord  Campbell,  before  whom 
the  case  had  been  tried,  and  who  then  held  adversely  to  the  plain- 
tiff, said: 

"I  then  thought  that  the  rule  caveat  e77iptor  applied;  but  after 
hearing  the  argument  and  the  authorities  cited,  I  think  the  action  is 
maintainable,  and  upon  this  ground:  That  the  article  sold  did  not 
answer  the  description  under  which   it  was  sold.      If  it  had  been  a 

'  "  The  defendant  in  the  case  cited  {^Marvin  v.  Jarvis\  had  knowledge  of  the 
usury,  which  was  not  the  fact  here,  and  hence  it  differs  from  the  case  at  bar, 
and  is  not  decisive  of  the  question.  .  .  .  The  law  in  regard  to  the  transfer 
of  negotiable  bills  of  exchange  and  promissory  notes,  as  laid  down  for  a  century 
-■r  more,  only  excepts  two  cases  as  coming  within  the  doctrine  of  an  implied 
warranty,  viz.;  a  warranty  of  title,  and  that  the  instrument  is  genuine  and 
not  forged.  There  is  no  precedent  and  not  a  single  reported  case  in  the  books 
in  favor  of  the  doctrine  that  where  a  promissory  note  is  infected  with  usury, 
and  that  fact  is  unknown  to  the  party  who  transferred  it,  that  is  an  implied 
warranty  of  the  validity  of  the  note." — Littauer  v.  Goldman, 12  N.  Y.  506.  See 
criticism  of  Littauer  v.  Goldman,  in  Meyer  \.  Richards,  163  U.  S.  3S5,  411,  and 
Wood  V.  Sheldon,  42  N.  J.  L.  421,  424.  —  Ed. 


IV.]  SELLER:    WARRANTIES.  465 

foreign  bill,  and  there  had  been  any  secret  defect,  the  risk  would 
have  been  that  of  the  purchaser;  but  here  it  must  be  taken  that  the 
bill  was  sold  as  and  for  that  which  it  purported  to  be.  On  the  face 
of  the  bill  it  purported  to  be  drawn  at  Sierre  Leone,  and  it  was  sold 
as  answering  the  description  of  that  which  on  its  face  it  purported 
to  be.  That  amounted  to  a  warranty  that  it  really  was  of  that 
description." 

In  Ticonic  Bank  v.  Smiley  (27  Me.  225),  an  overdue  note  was  trans- 
ferred with  this  indorsement,  "  Indorser  not  holden;  "  yet  it  was 
decided  that  the  indorser  was  liable  to  his  vendee  for  any  pay- 
ment made  on  the  note  before  the  transfer,  or  any  set-off  existing 
against  it  of  which  the  note  gave  no  indication  and  the  vendor  no 
information. 

In  Snyder  v.  Reno  (38  Iowa,  329),  it  was  held  that  there  is  an 
implied  warranty  that  there  has  been  no  material  alteration  in  the 
paper  since  its  execution.  The  court  says:  "  We  have  no  doubt 
that  there  is  an  implied  warranty  of  the  transferer  that  there  is  no 
defect  in  the  instrument,  as  well  as  that  the  signature  of  the  maker 
is  genuine."  (See  also,  Bletlien  v.  Lovering,  58  Me.  437;  Ogden  v. 
Blydenburgh,  i  Hilton,  182;  Fake  ^ .  Smith,  2  Abb.  [N.  Y.J  App.  76; 
2  Parsons  on  Notes  and  Bills,  ch.  2,  §  2,  and  cases  in  notes;  Terry 
v.  Bisseli,  26  Conn.  23;   i  Daniel   on   Neg.  Inst.,  §  670.) 

In  this,  the  author  thus  states  the  law: 

"  When  the  indorsement  is  luithout  recourse,  the  indorser  specially 
declines  to  assume  any  responsibility  as  a  party  to  the  bill  or  note; 
but  by  the  very  act  of  transferring  it,  he  engages  that  it  is  what  it 
purports  to  be  — the  valid  obligation  of  those  whose  names  are  upon  it. 
He  is  like  a  drawer  who  draws  without  recourse ;  but  who  is,  neverthe- 
less, liable  if  he  draws  upon  a  fictitious  party,  or  one  without  funds. 
And,  therefore,  the  holder  may  recover  against  the  indorser  without 
recourse,  (i)  if  any  of  the  prior  signatures  were  not  genuine;  or, 
(2)  if  the  note  was  invalid  between  the  original  parties,  because  of 
the  want,  or  illegality  of,  the  consideration;  or,  (3)  if  any  prior 
party  was  incompetent;  or,  (4)  the  indorser  was  without  title." 

These  authorities  fully  sustain  the  ruling  of  the  district  court. 
The  note  was  not  the  legal  obligation  of  the  maker  to  the  full 
amount.  As  to  the  usurious  portion,  it  was  as  it  were  no  note. 
This  was  a  defect  in  the  very  inception  of  the  note.  It  was  known 
to  the  vendor  and  arose  out  of  his  own  dealings  in  the  matter.'  By 
all  these  authorities  there  is  an  implied  warranty  against  such  a 
defect,  and  the  vendor  is  liable  for  a  breach  thereof. 

The  suggestion  of  counsel  that  the  change  in  the  usury  law,  by 
the   legislation   of   1872,   affected   the  right    of    recovery  upon    the 

'  It  will  be  observed  that  this  brings  the  case  within  subs.  4  of  §  115 
[65].  -  Ed. 

negot.  instruments  —  30 


466  LIABILITY    OF    PARTIES.  [ART.  VI. 

note,  has  been  already  decided  adversely,  in  the  case  of  yenness  v. 
Cutler  (i2  Kas.  500). 

All  the  justices  concurring.      Judgment  affirmed. 


I  115  HANNUM  V.  RICHARDSON.  [§  65] 

4S  Vermont,  508.  —  1075. 

Assumpsit  for  false  warranty  in  sale  of  a  promissory  note.  The 
note  was  made  by  Lincoln  payable  to  Mcintosh,  for  an  illegal  con- 
sideration rendering  it  void  by  statute ;  was  indorsed  without  recourse 
by  Mcintosh  to  defendant  and  without  recourse  by  defendant  to 
plaintiff.     Judgment  for  plaintiff. 

The  opinion  of  the  court  was  delivered  by 

PiERPONT,  Ch.  J.  —  It  may  be  observed  in  the  outset,  that  this 
action   is   not  brought  by  the   plaintiff  as  the  indorsee  of  the   note 
referred  to  against  the  defendant  as  the  indorser,  and  the  action  is  not 
based   upon   the  mdorsement,  but  is  brought  upon  an  alleged  war- 
ranty by  the  defendant  that  the  note  was  a  valid  and  binding  note, 
based  upon  a  valid   and   lawful   consideration,  when  in  fact  it  was 
given  for  an  illegal  consideration,  and  was  at  its  inception  void.      On 
trial  the  plaintiff  introduced  evidence  in  support  of  his  declaration. 
After  the  evidence  was  in,  the  defendant  insisted  that  as  it  appeared 
from   the   note   that  it  was   indorsed   by   the    defendant  "  without 
recourse,"  the  legal  effect  of  the  indorsement  could  not  be  varied  or 
controlled  by  evidence  outside  of  the  indorsement  itself  —  that  the 
same  was  conclusive  in  that  respect;  but  the  court  held  that  such 
indorsement  was  not  of  itself  conclusive  of  its  legal  effect  in  such 
sense  as  to  exclude  the  evidence  aliunde;  and  submitted  the  case  to 
the  jury  in  accordance  with  such  ruling,  and  it  is  upon  this  decision 
and  the  charge  of  the  court  in  respect  to  it,  that  the  only  question 
that  has  been  raised  and  discussed  by  the  defendant's  counsel  arises. 
What  would  have  been  the  effect  of  this  objection  if  the  action  had 
been  based  upon  the  indorsement,  it  is  not  necessary  now  to  inquire. 
By  indorsing  the  note  "  without  recourse,"  the  defendant  refused  to 
assume  the  responsibility  and  Uability  which  the  law  attaches  to  an 
unqualified  indorsement,  so  that  in  respect  to  such  liability,  it  may 
perhaps  be  regarded  as  standing  without  an  indorsement.      If  it  be 
so  regarded,  then  in  what  position  do  these  parties  stand  in  respect 
to  the  transaction?     The  principle  is  well  settled,  that  where  per- 
sonal property  of  any  kind  is  sold,  there  is  on  the  part  of  the  seller 
an  implied  warranty  that  he  has  title  to  the  property,  and  that  it  is 
what  it  purports  to  be,  and   is   that  for  which  it  was  sold,  as  under- 


IV.]  SELLER:    WARRANTIES.  467 

Stood  by  the  parties  at  the  time;  and  in  such  case,  knowledge  on 
the  part  of  the  seller  is  not  necessary  to  his  liability.  The  implied 
warranty  is,  in  this  respect,  like  an  express  warranty,  the  scienter 
need  not  be  alleged  or  proved.  Edwards,  in  his  work  on  Bills  and 
Promissory  Notes  (p.  1S8),  says  "  One  who  transfers  a  negotiable 
instrument  by  delivery  or  by  indorsement,  impliedh' guarantees  that 
it  is  genuine,  and  that  he  has  title  to  it.  The  rule  is  the  same  in 
regard  to  personal  property.  The  vendor  of  a  chattel  always  gives 
an  implied  warranty  of  the  title.  (15  Johns.  240;  6  Cow.  4S4; 
4  Duer  [N.  Y.J  191;  6  Johns.  5.)  Though  the  indorser  transfers 
the  note  upon  condition  that  it  is  to  be  collected  at  the  risk  of  the 
indorsee,  he  is,  nevertheless,  responsible  if  the  note  proves  to  be  a 
forgery."     (Edwards,  289.) 

In  this  case  the  note  in  question  was  given  for  intoxicating  liquor 
sold  in  this  State  in  violation  of  law,  and  therefore  was  void  at  its 
inception;  in  short,  it  was  not  a  note,  it  was  not  what  it  purported 
to  be,  or  what  it  was  sold  and  purchased  for;  it  is  of  no  more  effect 
than  if  it  had  been  a  blank  piece  of  paper  for  which  the  plaintiff  had 
paid  his  fifty  dollars.  In  this  view  of  the  case  we  think  the  defend- 
ant is  liable  upon  a  warranty  that  the  thing  sold  was  a  valid  note  of 
hand. 

The  plaintiff  has  declared  as  upon  an  express  warranty.  If  he  could 
prove  one,  very  well;  if  he  could  not,  the  implied  warranty  is  just 
as  available  to  him,  the  declaration  being  according  to  its  legal  effect. 

This  view  of  the  case  relieves  it  from  all  embarrassment  growing 
out  of  the  question  as  to  the  admissibility  of  parol  testimony  to  vary 
the  indorsement,  as  the  effect  of  the  indorsement  is  really  not 
involved  in  the  case.  And  the  ruling  and  charge  of  the  court  were 
really  more  favorable  to  the  defendant  than  he  had  the  right  to  ask. 

The  exceptions  to  the  overruling  of  the  motion  in  arrest  were 
waived.  The  exceptions  to  the  refusal  to  set  aside  the  verdict  as 
against  the  evidence,  this  court  refuses  to  hear,  the  decision  of  the 
County  Court  being  conclusive  in  such  cases. 

Judgment  affirmed.' 


'  Where  the  State  constitution  forbids  the  enforcement  of  any  debt  the  con- 
sideration of  which  was  a  slave,  the  indorser  of  a  note  is  nevertheless  liable  on 
his  indorsement,  although  the  original  consideration  between  the  maker  and 
the  payee  was  a  slave.     Graham  v.  Maguire,  39  Ga.  531.  —  Ed. 


468  LIABILITY    OF   PARTIES.  [ART.  VI. 

2.   Title  of  Seller. 

§115    WILLIAMS  7'.  TISHOMINGO  SAVINGS   INST'N.    [§65] 

57  Mississipn,  633.  —  1880. 

George,  C.  J.,  delivered  the  opinion  of  the  court. 

The  appellants,  having  indorsed  to  the  appellee  a  bill  of  exchange, 
to  which  they  claimed  title  through  a  forged  indorsement,  now  insist 
that  they  incurred  no  responsibility  by  their  indorsement,  except  a 
guaranty  that  the  drawee  would  pay  it  on  presentation.  But  the 
rule  is  well  settled  that  an  indorser  warrants  the  genuineness  of  the 
prior  indorsements  on  the  bill,  and  also  his  title  to  the  paper.  Should 
it  be  ascertained,  even  after  payment  of  the  bill,  that  any  of  the 
indorsements  are  forged,  the  drawee  can  recover  back  the  amount 
of  the  bill  from  the  person  to  whom  he  paid  it;  and  so  each  preced- 
ing indorser  may  recover  from  the  person  who  indorsed  the  bill  to 
him.  The  drawee  is  bound  to  know  the  signature  of  the  drawer, 
but  not  of  the  indorser.  The  judgment,  which  is  in  accordance  with 
these  views,  is 

Affirmed.' 


3.  Capacity  of  Prior  Parties. 
§  115  ERWIN  V.  DOWNS.  [§  65] 

15  New  York,  575.  —  1S57. 

Action  against  indorser  of  notes  signed  by  a  firm  of  married" 
women,  and  indorsed  by  defendant  for  their  accommodation.  Plain- 
tiff took  the  notes  with  knowledge  that  the  makers  were  married 
women.     Judgment  for  plaintiff. 

Shankland,  J. — The  note  was  void,  as  against  the  makers, 
because  they  were  married  women,  and  incapable  of  contracting 
obligations  in  that  form.  But  when  the  defendant  indorsed  the 
note,  he  impliedly  contracted  that  the  makers  were  competent  to 
contract,  and  had  legally  contracted,  the  obligation  of  joint  makers 
of  the  note.  He  also  assumed  the  legal  obligation,  in  most  respects, 
of  the  drawers  of  the  bill.  The  fact,  known  to  the  plaintiff  at  the 
time  he  took  the  note,  that  the  makers  were  married  women,  did 
not  deprive  him  of  the  character  of  a  bona  Jide  purchaser.  Nor  does 
the  payee's  knowledge  that  the  drawee  is  a  married  woman,  dis- 
charge the  drawer  in  case  of  non-payment  of  the  bill  by  the  drawee. 

'  Accord:    Stati-  Bank  v.  Fearing,  i6  Pick.  (Mass.)  533.  — Ed. 


T\^]  SELLER:   WARRANTIES.  469 

Nor  is  the  indorser  discharged,  though  the  name  of  the  maker  is 
forged,  (i  Comst.  113.)  The  fact  is  not  found  that  the  plaintiff 
was  aware  the  note  was  accommodation  paper.  The  plaintiff  was  a 
bona  fide  purchaser  within  the  law  merchant.  Neither  the  complaint, 
nor  the  finding  of  the  referee,  tell  us  who  transferred  the  notes  to 
the  plaintiff.  The  legal  presumption  is,  that  he  received  them  from 
some  legal  holder  in  due  course  of  business. 

The  judgment  should  be  affirmed. 

Brown,  J.,  delivered  an  opinion  to  the  same  effect. 

All  the  other  judges  concurring. 

Judgment  affirmed. 


4.   Knowledge  of  Invalidity  or  Valuelessness. 

§  115  BROWN  V.  MONTGOMERY.  [§  65] 

20  New  York,  2S7.  —  1S59. 

Action  on  a  note.  Defence,  fraud.  Plaintiffs  sold  defendants 
a  post-dated  check  drawn  by  Farnham  &  Co.  to  the  order  of  L. 
R.  Farnham,  one  of  the  firm,  and  by  him  indorsed.  On  the  day  of 
the  sale  plaintiffs  employed  Cutting,  a  bill  broker,  to  sell  the  check. 
Cutting  offered  it  to  one  Chard,  who  declined  it  on  the  ground  that 
he  held  one  drawn  and  indorsed  by  the  same  parties  which  had  just 
been  protested  for  non-payment.  Cutting  then  sold  it  to  defendants 
without  disclosing  the  conversation  with  Chard.  The  drawers  were, 
unknown  to  defendants,  insolvent.  The  note  in  suit  was  given  for 
the  purchase  price  of  the  check. 

The  court  charged  the  jury  that  the  non-payment  and  protest  of  the 
check,  on  the  nth  April,  was  evidence  tending  to  show  insolvency 
in  the  drawers;  that  it  was  the  duty  of  Cutting  to  communicate  to 
the  defendants  what  he  had  heard  Chard  say  about  the  protest  of  that 
check,  without  regard  to  what  he  may  have  thought  about  the  sol- 
vency of  the  drawers;  and  if  he  did  not  do  so,  and  they  were  really 
insolvent,  the  plaintiffs  could  not  recover  on  the  note.  The  plain- 
tiffs' counsel  excepted  to  both  branches  of  the  charge.  There  was 
a  verdict  and  judgment  for  the  defendants,  which  was  affirmed  at  a 
general  term.      The  plaintiff  appealed. 

Denio,  T-  —  I  think  there  was  no  error  in  the  charge  to  the  jury 
in  the  Superior  Court.  The  law  unciuestionably  is,  as  it  was  assumed 
on  the  argument,  that  notice  to  the  plaintiffs'  agent.  Cutting,  while 
he  was  actually  engaged  in  attempting  to  sell  the  check,  of  the 
failure  of  the  drawers,  was  ecpiivalent,  so  far  as  the  present  action  is 
concerned,  to  notice  to  the  plaintiffs  themselves. 


470  LIABILITY    OF   PARTIES.  [ART.  VI. 

What  Chard  informed  him,  was  not  precisely  that  Farnham  &  Co. 
had  failed,  but  that  their  check  on  the  bank  at  which  they  kept  their 
account  was  that  day  protested  for  non-payment.  This,  prima 
facie,  was  notice  that  they  had  suspended  payment;  for  when  a 
business  man  in  a  commercial  town  fails  to  meet  his  paper,  paj'able 
at  a  bank,  and  especially  his  checks  upon  the  bank  at  which  he 
keeps  his  account,  the  natural  inference  which  every  one  draws  is, 
that  he  is  no  longer  able  to  pay  his  debts.  Such  a  circumstance  may 
occur  from  oversight  or  accident,  but  those  are  exceptional  cases. 
The  failure  to  meet  the  paper  is  itself  a  suspension  of  payment, 
and  notice  of  such  a  fact,  unaccompanied  with  any  explanation  which 
would  give  it  a  different  character,  is  notice  of  the  commercial 
failure  of  the  party.  That  it  was  so  understood  by  Cutting  and 
Chard  is  evident  from  the  fact  that  they  speculated  upon  the  ques- 
tion, whether  the  members  of  the  firm  drawing  the  check  would 
ultimately  be  able  to  pay.  Upon  that  question,  Chard,  as  a  creditor 
is  apt  to  do,  took  the  most  favorable  view  It  is  apparent  that 
neither  of  them  expected  the  check  to  be  paid  on  presentation  when 
it  should  mature,  five  days  afterwards.  The  Superior  Court  con- 
sidered that  the  confidence  which  Chard  expressed  in  the  ultimate 
solvency  of  the  members  of  the  firm,  did  not  relieve  Cutting  from 
the  duty  of  communicating  to  the  defendants  the  fact  that  its  check 
had  not  been  met.  I  am  of  the  same  opinion.  Up  to  that  time  the 
drawers  were  in  good  credit,  and  their  paper  of  this  kind,  we  are  to 
presume,  was  promptly  met.  Thereafter,  the  holders  of  such  paper 
were  to  be  put  upon  their  legal  diligence  in  the  courts,  with  a  fair 
expectation,  perhaps,  that  they  might  ultimately  be  able  to  obtain 
payment.  The  difference  between  a  bank  check  having  five  days  to 
run,  and  which  is  then  to  be  paid,  and  a  suspended  debt  against 
parties  who  have  failed,  is  sufficiently  obvious.  The  defendants 
purchased  this  check  as  one  of  the  former  class,  whde  the  plaintiffs' 
agent  well  knew  that  it  belonged  to  the  latter,  and  withheld  that 
knowledge  from  the  defendants.  The  plaintiffs'  conduct  is  less 
censurable,  morally,  than  it  would  be  had  it  been  proved  that  they 
personally  knew  of  the  failure  of  the  drawers;  but  in  point  of  law, 
the  case  is  the  same  as  though,  after  hearing  that  Farnham  &  Co.  had 
failed,  they  took  the  paper  which  they  held  against  them  into  the 
street,  and  sold  it  to  parties  who  had  not  heard  of  that  event.  Such 
an  act  could  not  be  justified  at  law  any  more  than  in  the  forum 
of  conscience. 

The  judge  was  therefore  perfectly  correct  in  instructing  the 
jury  that  it  was  the  duty  of  Cutting  to  communicate  to  the  de- 
fendants what  he  had  heard  Chard  say  as  to  the  protest  of  the  other 


IV.]  SELLER:    WARRANTIES.  4/1 

check.  He  was  also  correct  in  advising  them  that  the  consequences 
of  omitting  to  do  so  was  that  the  plaintiffs  could  not  recover  on  the 
note.  Where  a  party  negotiates  commercial  paper,  payable  to 
bearer,  or  under  the  blank  indorsement  of  another  person,  he  cannot 
be  sued  on  the  paper  because  he  is  not  a  party  to  it;  but  he  neverthe- 
less warrants  that  he  has  no  knowledge  of  any  facts  which  prove  the 
paper  to  be  worthless,  on  account  of  the  failure  of  the  makers,  or 
by  its  being  already  paid,  or  otherwise  to  have  become  void  or 
defunct;  for,  says  Judge  Story,  any  concealment  of  this  nature 
would  be  a  manifest  fraud.      (S/ory  on  Prom.  Notes,  §  ii8.) 

The  plaintiffs'  counsel  argued  that,  according  to  the  case  of  Nichols 
V.  Pinner  (iS  N.  Y.  295),  the  plaintiffs  and  their  agent  were  war- 
ranted in  maintaining  silence  as  to  the  failure  of  Farnham  &  Co., 
though  they  knew  it  and  the  defendants  did  not.  But  the  cases  are 
essentially  different.  There  we  decided,  that  where  a  merchant, 
knowing  himself  to  be  insolvent,  purchases  goods  without  disclos- 
ing the  fact,  there  being  no  inquiry  made,  he  is  not  necessarily  guilty 
of  fraud,  as  he  may  honestly  believe  that  he  can  go  on  and  retrieve 
his  affairs.  "Where  so  much  of  the  trade  of  the  country  is  conducted 
without  invested  capital,  or  on  borrowed  capital,  it  must  often  happen 
that  a  merchant  who  is  ultimately  successful  has  known  periods  of 
commercial  disaster  when  his  property  would  not  pay  his  debts.  It 
would  be  too  strict  to  hold,  that  under  such  circumstances  he  must 
in  all  cases  go  into  liquidation,  or  expose  himself  to  probable  bank- 
ruptcy by  disclosing  his  condition.  But  the  case  does  not  counte- 
nance the  position,  that  a  dealer  who  has  been  of  known  standing, 
but  who  has  suddenly  failed  in  business,  can  go  to  those  who  were 
acquainted  with  his  former  character,  but  who  have  not  heard  of 
his  failure,  and  innocently  purchase  their  property  on  credit. 
Judge  vSelden,  in  his  opinion,  puts  that  case  as  one  not  covered  by 
the  judgment. 

The  judge  was  also  right  in  stating  to  the  jury,  that  the  non-pay- 
ment of  the  check,  spoken  of  by  Chard,  was  evidence  upon  the  ques- 
tion of  the  insolvency  of  the  drawers.  I  have  already  stated  what  I 
consider  the  necessary  inference  from  such  a  circumstance  among 
business  men.      The  judgment  must  be  affirmed. 

Johnson,  Ch.  J.,  Comstock,  Gray,  and  (tRovkr,  JJ.,  concurring. 

Judgment  affirmed.' 


'  Cited  with  approval  in  Rothmiller  v.  Stein,  143  N.  Y.  p.  592.  But  the  seller 
is  not  bound  to  disclose  that  the  instrument  is  accommodation  paper  drawn  fay 
a  clerk  and  accepted  by  the  accommodated  party.  People's  Bank  v.  Bogart,  81 
N.  Y.  loi.  —  Ed. 


472  LIABILITY    OF   PARTIES.  [ART.  VL 

5.   Indorser:   Instrument  Valid  and  Subsisting. 
§  116        PRESCOTT   NATIONAL  BANK  r.  BUTLER.       [§  66] 

157  Massachusetts,  54S.  —  1S93. 

Action  against  indorser.     Judgment  for  plaintiff. 

Knowlton,  J.  —  The  defendant  contends  tliat  the  plaintiff  cannot 
recover;  first,  because  it  has  no  title  to  the  note;  and  secondly, 
because  the  note  was  made  on  the  Lord's  day,  in  violation  of  the 
statute.  It  is  argued  that,  under  the  statutes  of  the  United  States, 
national  banks  cannot  buy  or  sell  promissory  notes,  and  that,  inas- 
much as  the  plaintiff  obtained  the  note  by  purchase,  it  has  no  right 
to  hold  or  collect  it.  [The  court  holds  on  this  that  even  if  the  pur- 
chase is  ultra  vires  the  public  alone  can  complain,  and  that  in  any 
event  the  bank  may  maintain  a  suit  as  "  holder."]  ' 

Of  the  second  ground  of  defence  it  may  be  said  that  the  contract 
relied  on  in  this  suit  is  the  contract  between  the  defendant  as 
indorser  and  the  plaintiff.  That  was  not  made  on  the  Lord's 
day.  .  .  .  Whether  the  note  could  be  enforced  by  the  payee 
against  the  maker  is  immaterial  in  this  suit,  for  an  indorser  of  a 
promissory  note  "  always  warrants  the  existence  and  legality  of  the 
contract  which  he  undertakes  to  assign."  {Bur rill  v.  Smith,  7  Pick. 
291,  294;  Veazie  v.  Willis,  6  Gray,  90;  Prescott  Bank  v.  Caverly,  7 
Gray,  217;  Kciiworthy  v.  Saiuyer,  125  Mass.  28;  BinneyY.  Globe  Ahrt. 
Bank,  150  Mass.  574,  578;  Hannum  v.  Richardson,  48  Vt.  508;  Hender- 
son V.  Lemlx,  79  N.  C.  169.)  The  defendant  by  his  indorsement  is 
estopped  to  deny  that  the  note  is  a  valid  contract,  and  as  against 
him  it  must  be  assumed  that  it  was  made  and  delivered  at  a  time 
when  such  business  could  lawfully  be  done.  The  presiding  justice 
rightly  refused  to  rule  that  the  plaintiff  was  not  entitled  to  recover. 

Exceptions  overruled.^ 

'  See  Neg.  Inst.  L.,  §  90  [51].  —  Ed. 

5  Indorsement  admits  the  signature  and  capacity  of  every  prior  party. 
Prescott  Bank  v.  Caverly,  7  Gray,  217.  This  includes  the  existence  and  capacity 
of  a  firm,  Dalrymple  v.  Hillenbrand,  62  N.  Y.  5;  or  of  a  corporation,  Glidden  v. 
Chamherlin,  167  Mass.  486,  494;  or  of  a  married  woman,  Edmunds  v.  Rose,  51 
N.  J.  L.  547.      See  Hannum  v.  Richardson,  48  Vc.  508,  ante,  p.  466.  —  Ed. 


IV.]  SELLER:    WARRANTIES.  473 

6.   Liability  of  Agent  as  Seller. 
§  119  WORTHINGTON  v.  COWLES.  [§  69] 

112  Massachusetts,  30.  —  1S73. 

Action  to  recover  back  money  paid  by  plaintiff  to  defendants  for 
a  promissory  note  signed  by  one  Hanson,  tlie  indorsement  upon 
which  was  forged.  Defendants  were  note-brokers,  who  sold  the 
note  for  Hanson,  and  paid  him  the  purchase  money,  less  commis- 
sions, before  the  forgery  was  discovered.  Judgment  for  plaintiff. 
Defendants  allege  exceptions. 

Morton,  J.  —  This  is  an  action  of  contract  upon  the  implied 
warranty  of  the  genuineness  of  the  signature  to  a  note  sold  by  the 
defendants  to  the  plaintiff.  The  plaintiff  claimed  that  in  the  pur- 
chase of  the  note  he  dealt  solely  with  the  defendants,  and  upon  their 
credit.  The  defendants  claimed  that  they  were  acting  as  agents  of 
Hanson  in  the  transaction,  and  that  their  principal  was  disclosed  to 
the  plaintiff.  Upon  these  points  the  evidence  was  conflicting. 
The  defendants  asked  the  court  to  rule  "  that  if  the  defendants  were 
in  fact  agents  for  Hanson,  and  disclosed  their  agency  to  the  plain- 
tiff, or  the  plaintiff  knew  it,  or  had  reasonable  cause  to  know  it,  the 
defendants  would  not  be  liable." 

Considered  as  an  abstract  proposition  of  law,  this  is  too  broad. 
It  omits  the  necessary  element  that,  in  the  dealing  or  transaction  in 
question,  they  were  acting  as  such  agents.  It  may  be  true  that  the 
defendants  were  agents  of  Hanson,  and  known  to  be  such  by  the 
plaintiff,  and  yet  if,  in  the  purchase  of  this  note,  it  was  understood 
by  the  parties  that  the  plaintiff  was  dealing  with  and  upon  the  credit 
of  the  defendants,  they  would  be  liable.  An  agent  may  deal  so  as 
to  bind  himself  personally;  it  is  always  a  question  of  the  intention 
and  understanding  of  the  parties.  The  presiding  judge  properly 
refused  to  give  the  instructions  in  the  form  requested  by  the  defend- 
ants. Instead  thereof,  he  ruled  in  substance  that  the  question  was, 
from  whom  did  the  plaintiff  understand  that  he  was  buying  the 
note — -from  the  brokers  or  from  Hanson?  and  that  if  such  a  state 
of  facts  occurred,  that  the  plaintiff  understood,  or  ought  to  have 
understood  as  a  man  of  reasonable  intelligence,  that  he  was  dealing 
with  Hanson,  the  defendants  would  not  be  liable. 

These  instructions  were  correct,  as  applied  to  the  facts  of  the  case. 
The  plaintiff  dealt  with  the  defendants.  His  evidence  tended  to 
show  that  he  contracted  with  them  as  jjrincipals.  To  meet  this 
prima  facie  case,  the  defendants  undertook  to  show  that  in  this 
transaction  they  were   dealing  as  agents  of  a   disclosed   principal. 


474  LIABILITY   OF   PARTIES.  [ART.   VI. 

Unless  from  their  disclosures  or  other  sources  the  plaintiff  under- 
stood, or  ought  as  a  reasonable  man  to  have  understood,  that  he  was 
dealing  with  Hanson,  he  had  a  right  to  assume  that  he  was  dealing 
with  the  defendants  as  principals.  The  instructions  given  were  to 
this  effect,  and  were  as  favorable  to  the  defendants  as  the  instruc- 
tions requested,  with  the  addition  of  the  necessary  qualification  that 
the  defendants  were  in  this  transaction  dealing  as  the  agents  of  Han- 
son. {Wilder  v.  Cowles,  loo  Mass.  487;  Merriam  v.  JVolcott,  3  Allen, 
258.) 

Exceptions  overruled.' 


V.  Indorser :    secondary,  conditional  liability. 

I.   Indorser's  Contract  as  Seller. 
[See  preceding  subdivision  IV,  pp.  452-472. J 

2.  Indorser's  Contract  as  Assurer  of  Payment. 
§  116  LONG  V.  STEPHENSON.  [§  66] 

72  North  Carolina,  569.  —  1S75. 

Action  against  indorser.  Plaintiff  alleged  that  the  drawee  refused 
to  accept  or  pay,  and  that  defendant  on  demand  also  refused  to  pay. 
Defendant  alleged  non-presentment  to  drawee  and  want  of  notice  of 
dishonor.     Judgment  for  defendant. 

Settle,  J. — The  authorities  cited  by  the  defendant's  counsel 
establish  beyond  controversy: 

1.  That  the  draft  should  have  been  presented  for  payment." 

2.  That  notice  of  non-payment  should  have  been  given  in  reason- 
able time  to  the  defendant.' 

As  both  of  these  essential  requisites  to  the  maintenance  of  this 
action  are  wanting,  we  concur  with  his  Honor  that  the  plaintiff  is 
not  entitled  to  recover. 

Judgment  affirmed. * 

'  Accord:  Aleriden  N'ational  Bank  v.  Gallaudet,  I20  N.  Y.  298;  Brown  v.  Ames, 
59  Minn.  476;  Huffcut  on  Agency,  §  186.  —  Ed. 

'^  Post,  Art.  VII.  — Ed. 

^  Post,  Art.  Vni.     As  to  protest  as  a  third  requisite,  see  Art.  XIII, /^^/.  —  Ed. 

*"The  liability  of  the  indorser  is  strictly  conditional,  dependent  both  upon 
due  demand  of  payment  upon  the  maker  or  acceptor,  and  also  due  and  legal  notice 
of  the  non-payment.  The  purpose  and  object  of  such  demand  and  notice  is  to 
enable  the  indorser  to  look  to  his  own  interest,  and  take  immediate  measures 
for  his  indemnity.     The  demand  and  notice  being  conditions  precedent  to  the 


V.  2.]  INDORSER.  475 

§  117        BRUSH  V.  ADMINISTRATORS  OF  REEVES.       [§  67] 

3  Johnson  (N.  Y.),  439- — tSoS. 

The  plaintiff  declared  on  a  promissory  note,  given  by  one  Spring 
to  Reeves,  the  intestate,  and  payable  to  him  or  bearer.  The  note 
was  indorsed  over  by  Reeves,  and  the  present  suit  was  brought  by 
the  indorsee  against  his  administrators.  There  was  a  general 
demurrer  to  the  declaration,  which  was  in  the  usual  form  against  the 
indorser. 

Per  Curiam.  —  The  note  was  negotiable  under  the  statute,  and 
transferable  without  indorsement;  but  if  the  payee  chose  to  put  his 
name  on  the  back,  he  became  as  much  bound  as  an  indorser,  as  if 
the  note  had  been  made  payable  to  him  or  order. 

It  was  ruled  by  Chief  Justice  Holt,  in  the  case  of  The  Bank  of 
England  Y.  Neiuman  (i  Lord  Raym.  442),  that  if  a  person  indorses  a 
bill  payable  to  bearer,  he  becomes  a  new  security,  and  is  liable  on 
the  indorsement.  The  declaration  at  least  is  good  on  a  special 
demurrer.  But  the  defendant  may  withdraw  the  demurrer,  on  pay- 
ment of  costs,  and  pleading  forthwith. 

Judgment  for  the  plaintiff.' 


§  116  OOTHOUT  V.  BALLARD.  [§  66] 

41  Barbour  (N.  Y.),  33.  —  1S64. 

Action  against  indorsers  on  note  due  Nov.  29  (Saturday).  Notice 
of  dishonor  received  about  6  p.  m.  of  that  day.  Service  of  summons 
and  complaint  in  this  action  soon  after  on  the  same  day.  Judgment 
for  plaintiff. 

By  the  Court,  Mason,  J. — The  only  question  presented  in  this 
case  is  whether  a  suit  can  be  maintained  against  the  indorsers  of  a 
note  payable  at  a  bank,  and  which  has  been  duly  protested,  where 


indorser's  liability,  it  is  incumbent  on  the  holder  to  make  clear  and  satisfactory 
proof  of  them  before  he  can  recover."     Lawson  v.  Farmers'  Bank,  i  Oh.  St.  206 

"  The  indorser  of  a  bill  of  exchange,  whether  payable  after  date  or  after 
sight,  undertakes  that  the  drawee  will  pay  it,  if  the  holder  present  it  to  him  at 
maturity  and  demand  payment;  and  if  he  refuse  to  pay  it,  and  the  holder 
cause  it  to  be  protested,  and  due  notice  to  be  given  to  the  indorser,  then  he 
promises  to  pay  it.  All  these  conditions  enter  into  and  make  part  of  the  con- 
tract between  these  parties  to  a  foreign  bill  of  exchange;  and  the  law  imposes 
the  performance  of  them  upon  the  holder,  as  conditions  precedent  to  the  liabil- 
ity of  the  indorser  of  the  bill."     Musson  v.  Lake,  4  How.  (U.  S.)  262.  —  Ed. 

'  See  p.  480,  note  (2),  post. 


476  LIABILITY   OF   PARTIES.  [ART.  VI. 

the  suit  is  commenced  on  the  day  of  the  protest,  or  the  third  day  of 
o-race.  The  rule  in  England,  as  understood  by  Chitty,  is  that  the 
suit  on  the  third  day  of  grace  is  premature.  (See  Chitty  on  Bills, 
406,  407,  409,  8th  Lond.  ed.)  And  such  I  understand  to  be  the  rule 
held  in  Westminster  Hall.  {Castriquc  v.  Bernabo,  6  Queen's  B.  R. 
49S;  Liffertyw  Mills,  4  T.  R.  170.)  The  rule  is  so  understood  by 
Byles.  (See  his  late  work  on  Bills,  p.  181.)  In  this  country  there  is 
certainly  considerable  conflict  of  authority  over  the  question,  in  the 
courts  of  the  different  States.  The  courts  of  Maine,  New  Hamp- 
shire, Massachusetts,  South  Carolina,  and  some  others,  have  held  that 
the  suit  could  be  commenced  on  the  third  day  of  grace,  at  any  time 
after  the  close  of  banking  hours  and  proper  protesting  of  the  note, 
(i  Pick.  401;  21  id.  310;  8  id.  414;  i  Metcalf,  43,  48;  4  Greenl.  Rep. 
479;  7  N.  Hamp.  Rep.  199;  8  Foster,  302;  4  Humph.  241;  5  Shep. 
230;  31  Maine  Rep.  580;  40  id.  62;  15  id.  67;  Wilson  v.  Williamson, 
I  Nott  &  McCord.  440.)  While  on  the  other  hand  the  courts  of 
Pennsylvania,  Ohio,  Illinois,  Mississippi,  Alabama  and  some  others 
have  held  the  suit  prematurely  brought  if  commenced  on  the  third 
day  of  grace.  {Thomas  v.  Shoemaker,  6  Watts  &  Serg.  179;  Walte-r 
V.  Kirk,  14  Illinois  Rep.  55;  Wiggle  \.  Thomason,  11  Smedes  &  Marsh. 
452;  Bcavan  v.  Eldridge,  2  Miles,  353;  Randolph  \ .  Cook,  2  Porter, 
865;  5  Serg.  &  R.  318.) 

The  rule  in  this  State  has  long  been  regarded  as  settled  that  the 
suit  commenced  on  the  third  day  of  grace  was  prematurely  brought. 
The  question  came  before  the  Supreme  Court  in  Hogan  v.  Ciiyler  (8 
Cowen's  Rep.  203),  when  it  was  held  to  be  premature  to  commence 
the  suit  on  the  third  day  of  grace.  The  question  was  distinctly  pre- 
sented again  in  Osborn  v.  Moncure  (3  Wend.  170),  when  it  was  dis- 
tinctly held  the  suit  could  not  be  maintained,  when  commenced  on 
the  third  day  of  grace.  Chief  Justice  Savage  regarded  the  rule 
so  well  settled  with  us,  in  this  State,  that  he  held  in  Hopping  v. 
Qnin  (12  Wend.  517),  that  where  an  attorney  commenced  a  suit 
upon  a  note  on  the  third  day  of  grace  and  was  beaten  and  then 
brought  suit  against  his  client  to  recover  for  his  services,  he  was 
not  entitled  to  recover;  and  in  speaking  upon  this  question  he  says: 
"  It  was  the  duty  of  the  plaintiff  to  have  known  that  a  suit  could 
not  be  brought  on  the  last  day  of  grace;  and  his  bringing  such  a 
suit  must  be  imputed  either  to  negligence  or  ignorance.  In  either 
case  it  lays  no  foundation  for  an  action  against  his  client,  who  has 
been  the  sufferer."  There  is  no  case  in  the  courts  of  this  State  to 
the  contrary  of  these  cases,  while  all  the  elementary  books  have 
treated  our  law  in  this  State  as  settled  in  conformity  to  these  cases. 
Judge  Cowen  so  regarded  it  when  he  wrote  his  treatise,     (i  Cowen's 


V.   2.]  INDORSER.  477 

Tr.  220,  ed.  1S44),  where  he  lays  down  the  doctrine  distinctly,  that 
the  suit  cannot  be  maintained  if  commenced  on  the  last  day  of 
grace.  And  so  Edwards  regards  it  in  his  treatise  on  Bills  and  Notes 
(see  pages  525,  526,  527);  and  the  rule  in  this  State  is  so  regarded 
by  Parsons  in  his  treatise.  (See  Vol.  i,  page  440,  and  also  note  i.) 
Chief  Justice  Shaw  regards  our  rule  in  this  State  as  different  from 
theirs,      (i  Metcalf,  54.) 

The  rule  in  England  seems  to  have  conformed  to  a  general  prac- 
tice—  the  practice  to  postpone  notice  of  the  dishonor  and  other 
proceedings,  till  the  day  following  —  so  that  it  has  been  regarded 
amongst  merchants  as  a  right  to  have  all  of  the  last  day  of  grace  in 
which  to  pay.  In  Hartley  s  case  (i  Carr.  &  P.  555),  Abbott,  Ch.  J., 
on  a  motion  to  show  cause,  said,  "  I  think  the  notice  of  dishonor 
given  on  the  day  on  which  the  bill  is  payable,  will  be  good  or  bad  as 
the  acceptor  may  or  not  afterwards  pay  the  bill.  If  he  does 
not  afterwards  pay,  on  that  day  the  notice  is  good,  and  if  he  does 
it  of  course  comes  to  nothing."  And  Byles,  in  his  late  valuable 
treatise  on  B;lls,  page  131,  says:  "  The  acceptor  of  a  bill,  whether 
inland  or  foreign,  or  the  maker  of  a  note,  should  pay  it  on  demand 
made  at  any  time  within  business  hours  on  the  day  it  falls  due,  and 
if  it  be  not  paid  on  such  demand  the  holder  may  instantly  treat  it  as 
dishonored.  But,"  he  adds,  "  the  acceptor  has  the  whole  of  that  day 
within  which  to  make  payment,  and  though  he  should  in  the  course 
of  the  day  refuse  payment,  which  entitles  the  holder  to  give  notice  of 
dishonor,  yet  if  he  subsequently  on  the  same  day  makes  payment  it 
is  good,  and  the  notice  of  dishonor  becomes  of  no  avail."  This  is 
precisely  as  I  understand  the  rule  with  us.  Now  if  we  admit  that  the 
courts  of  Massachusetts,  Maine,  New  Hampshire,  etc.,  have  the  better 
reason  for  their  decisions,  there  is  no  such  great  principle  involved  in 
the  case  as  would  justify  us  in  overruling  our  own  cases  and  follow- 
ing theirs;  especially  so  where  we  are  supported  by  equal  weight  of 
authority  on  our  side;  and  Parsons,  who  is  an  earnest  advocate  on  the 
other  side,  admits  that  "  there  is  strong  reason  for  holding  that  a 
party  bound  to  pay  has  the  whole  of  the  day  of  maturity."  (Parsons 
on  Notes  and  Bills,  vol.  2,  p.  460.)  And  our  rule  has  certainly  one 
advantage;  it  tends  to  uniformity  in  the  law  by  conforming  to  the 
general  rule  with  reference  to  all  other  contracts,  which  holds  that 
when  a  day  is  appointed  for  the  payment  of  money  the  payer  has  the 
whole  of  the  day,  down  to  the  last  moment,  in  which  to  tender  the 
money. 

It  is  proper  to  remark  that  none  of  the  cases  make  any  differ- 
ence or  distinction  between  the  case  of  the  maker  or  indorser.  None 
can  be   made.     As  regards  this  question  of  the  right  to  bring  the 


478  LIABILITY    OF   PARTIES.  [ART.   VI. 

suit,  there  is  not  and  ought  not  to  be  any  distinction  between  a  note 
payable  at  bank  and  one  payable  at  large,  or  at  the  counting  house 
of  the  merchant;  and  none  seems  to  have  been  recognized  in  this 
State.     (2  Cowen,  766.)     .     . 

New  trial  granted. 


3.   Irregular  Indorser. 

§  114  COULTER  V.  RICHMOND.  [§  64] 

59  New  York,  47S. — 1S75. 

Action  on  promissory  note,  made  by  Anson,  and  indorsed  by 
George  (defendant's  intestate),  payable  to  the  order  of  plaintiff- 
Judgment  for  plaintiff. 

The  note  was  indorsed  at  the  request  of  the  maker,  before  delivery 
to  the  payee,  to  enable  the  maker  to  purchase  bonds  of  the  payee. 

Church,  Ch.  J. — There  is  considerable  diversity  of  sentiment 
among  the  courts  of  the  different  States  as  to  the  nature  of  the  con- 
tract implied  by  a  blank  indorsement  of  a  negotiable  note  before 
delivery  to  the  payee.  In  some  of  the  States  such  an  indorser  is 
p>-ima  facie  rQg2.vde.6.  as  a  guarantor,  in  others  an  indorser,  and  in 
others  a  joint  promisor.  (Parsons  on  Notes,  119,  and  notes  e,  f,  g, 
and  cases  there  cited;  40  N.  Y.  492,  reporter's  note.)  In  this  State, 
it  has  been  repeatedly  held,  and  is  too  strongly  settled  by  authority 
to  be  disturbed,  that  a  person  making  such  an  indorsement  is  pre- 
sumed to  have  intended  to  become  liable  as  second  indorser,  and 
that  on  the  face  of  the  paper  without  explanation,  he  is  to  be 
regarded  as  second  indorser,  and,  of  course,  not  liable  upon  the  note 
to  the  payee,  who  is  supposed  to  be  the  first  indorser.  (12  J.  R. 
159;  17  Id.  326;  37  N.  Y.  614;  50  Id.  69.)  As  the  paper  itself  fur- 
nishes on\y  prima  facie  evidence  of  this  intention,  it  is  competent  to 
rebut  the  presumption,  by  parol  proof  that  tne  indorsement  was 
made  to  give  the  maker  credit  with  the  payee.  (Z'^-)  Such,  among 
others,  was  the  case  of  Moore  v.  Cross  (19  N.  Y.  227),  where  the  in- 
dorsement was  made  to  enable  the  maker  to  purchase  coal  of  the 
payee;  and  it  v;as  held  that  the  person  making  it  was  liable  as  first 
indorser,  and  that  the  payee  could  maintain  an  action  against  him 
upon  the  note,  or,  if  the  payee  transferred  it,  he  might  indorse  it 
without  recourse. 

[The  Court  then  holds  the  proof  sufficient  in  this  case  to  show 


V.   2.]  INDORSER.  479 

that  defendant  intended  to  become  surety  for  the  maker  and  was 
therefore  liable  as  first  indorser.] 

Judgment  affirmed.' 

'  Irregular  Indorser.  There  is  a  hopeless  conflict  of  judicial  authority  as 
to  the  nature  of  the  contract  of  the  irregular  indorser,  c.  ^.  where  a  negotiable 
instrument  payable  to  A.  is  indorsed  first  by  B.,  delivered  to  A.,  and  then  (per- 
haps) indorsed  by  A.  and  transferred  to  C.  The  matter  is  solved,  Jirst,  by  a 
presumption  from  the  appearance  of  the  paper,  and,  second,  by  parol  evidence 
as  to  the  time  of  B.'s  indorsement  or  as  to  that  and  also  as  to  the  actual  contract 
intended  by  the  parties.     The  conflicting  rules  may  be  thus  stated: 

/.  Presumption  that  B.  is  an  indorser.  (i)  The  presumption  from  the  appear- 
ance of  the  paper  is  that  B.  is  a  second  indorser.  (a)  Upon  proof  that  the 
indorsement  was  made  before  delivery  to  the  payee  (A.),  the  irregular  indorser 
(B.)  is  treated  as  the  first  unqualified  indorser  and  is  liable  as  such  to  the  payee 
(unless  he  signed  for  the  accommodation  of  the  paj-ee),  and  to  subsequent  par- 
ties. It  is  as  if  the  payee  (A.)  indorses  without  recourse  to  the  irregular 
indorser  (B.),  and  the  latter  then  indorses  in  blank  to  the  payee.  In  theory, 
therefore,  the  payee  (A.)  is  the  first  (qualified)  indorser;  the  irregular  indorser  (B.) 
is  the  second  (unqualified)  indorser;  and  should  the  payee  (A.)  then  indorse  in 
blank  he  becomes  the  third  (unqualified)  indorser.  It  is  a  short  cut  to  say  that 
the  irregular  indorser  is  the  first  indorser,  because  he  is  the  first  unqualified 
indorser.  Moore  v.  Cross,  19  N.  Y.  227;  Wade  v.  Creighton,  25  Ore.  455; 
Blaheslee  v.  Hewett,  76  Wis.  341.  {b)  Upon  parol  proof  as  above  the  same  rule 
follows,  but  parol  proof  is  further  admissible  to  show  the  actual  contract,  as 
that  the  irregular  indorser  signed  as  maker  or  (if  statute  of  frauds  can  be 
escaped),  guarantor.  De  Pauzu  v.  Bank  of  Salem,  126  Ind.  553;  Schafer  v. 
Farmers',  etc..  Bank.  59  Pa.  St.  144;  Central  N.  B.  v.  Dreydoppcl,  134  Pa.  St. 
499;  Hayden  v.  IVeldon,  43  N.  J.  L.  128;  Nealv.  Wilson,  79  Ga.  736.  (r)  But  if 
the  instrument  is  non-negotiable,  the  irregular  indorser  is  held  to  be  a  maker  or 
guarantor.  Cromiuell  v.  He7vitt,  40  N.  Y.  492;  First  X.  B.  v.  Babcock,  94  Cal. 
96;  Poolv.  Anderson,  116  Ind.  83;    Gorman  v.  Ketehmn,  33  Wis.  427. 

(2)  In  Alabama  it  seems  that  the  irregular  indorser  is  treated  as  a  regular  first 
indorser.  Hooks  v.  Anderson,  58  Ala.  238.  See  also  YHe)i  Lung  v.  Burke,  9 
Hawaiian  Rep.  142. 

(3)  By  statute  in  some  jurisdictions  the  irregular  indorser  is  treated  as  a 
regular  indorser.  Bills  of  Exchange  Act  (Eng.),  §  56,  and  Chalmer's  Notes, 
p.  \%%et  seq.;  Dominion  Bills  of  Exchange  Act  (Canada),  §  56;  California  Code, 
§  3117,  and  see  Fessenden  v.  Summers,  62  Cal.  484;  Massachusetts  St.  of  1S74, 
c.  404.  In  Massachusetts  the  original  doctrine  that  the  irregular  indorser  is 
liable  as  a  co-maker  (Union  Bank  v.  Willis,  8  Met.  504),  seems  to  be  modified 
only  to  the  e?ctent  of  requiring  that  the  irregular  indorser  have  notice  of  dis- 
honor. The  irregular  indorser  in  Massachusetts  is  therefore  a  co-maker  with  a 
right  to  notice  of  non-payment  the  same  as  an  indorser.  Mulcare  v.  Welch,  160 
Mass.  58;  Legg  v.  Vinal,  165  Mass.  555;  Connecticut  Gen.  St.  §  i860,  as  con- 
strued in  Spencer  v.  Allerton,  60  Conn.  410  (now  governed  by  Neg.  Inst.  L.). 

//.  Presumption  that  B.  is  a  co-maker,  (i)  The  presumption  from  the  appear- 
ance of  the  paper  is  that  the  irregular  indorser  (B.)  is  a  co-maker.  Good  v. 
Martin,  05  U.  S.  90;  Good  v.  Martin,  I  Colo.  165;  Tabor  v.  Miles,  15  Colo.  App. 
127;   McCallum  v.  Driggs,  35  Fla.  277;   Bradford  \ .  Prescott,  85  Me.  482;    Schroedcr 


480  LIABILITY    OF   PARTIES.  [ART.  VI. 

4.  Order  of  Indorsers'  Liability. 

§  118  MOORE  V.  GUSHING.  [§  68] 

162  Massachusetts,  594.  —  1S95. 
GoNTRACT,  against  Louis  T.  Gushing  and  Harvey  H.  Pratt  upon 
the  following  promissory  note:  — 

$500.  24  Jjih,  1893. 

Three  months  after  date,  I  promise  to  pay  to  the  order  of  William  Moore  five 
hundred  dollars.     Payable  at  any  bank  in  Boston.     Value  received. 

Harvey  H.  Pratt. 

{Indorsed):    Louis  T.  Gushing,  William  Moore. 

V.  Turner,  68  Md.  506;  Gumz  v.  Giegling  (^loh..)  66  N.  W.  48;  Peninsular  Bank 
V.  Hcsie  (Mich.)  70  N.  W.  890;  Dennis  v.  Jackson,  57  Minn.  286;  Schultz  v. 
Howard,  63  Minn.  196;  Richardson  v.  Foster.  73  Miss.  12;  Mastin  Bank  v.  Hammer, 
slough,  72  Mo.  274  (cf.  First  Nat.  Bk.  v.  Payne,  ill  Mo.  291);  Salisbury  v.  First 
N.  B.,  37  Neb.  872;  Sargent  v.  Robbins,  ig  N.  H.  572;  jMcFetrich  v.  ll'oodrow, 
(N.  H.)  38  Atl.  18;  Hoffman  v.  Moore,  82  N.  Car.  313;  Ezoan  v.  Brooks- Water- 
afield  Co.,  55  Oh.  St.  596;  Jackson  Bank  v.  Irons,  iS  R.  I.  718;  Sylvester 
Bleckley  Co.  v.  Alewine,  (S.  C.)  26  S.  E.  609;  Provident,  etc.,  Soc.  v.  Edmonds,  95 
Tenn.  53;  Barton  v.  American  N.  B.,  S  Tex.  Civ.  App.  223;  Bank  v.  Dorset 
Marble  Co.,  61  Vt.  106;  Donohoe-Kelly  Banking  Co.  v.  Ptiget  Sound  Sav.  Bank, 
13  Wash.  407.  {a)  Most  of  the  above  jurisdictions  allow  parol  evidence  to  show 
the  real  contract,  i  Daniel  on  Neg.  Inst.,  §§  710-712.  (b)  A  few  States  do  not 
if  in  fact  B.  signed  before  delivery  to  rlie  payee.  Dennis  v.  Jackson,  57  Minn. 
286. 

(2)  But  if  the  paper  is  payable  to  the  drawer's  or  maker's  own  order  and 
indorsed  by  B.  before  negotiation,  the  irregular  indorser  is  treated  as  a  first 
indorser,  the  paper  being  put  upon  the  same  footing  as  paper  payable  to  bearer. 
Bigelow  v.  Colton,  13  Gray  (Mass.)  309;  Clapp  v.  Rice,  13  Gray  (Mass.)  40J; 
Dubois  v.  Mason,  127  Mass.  37;  First  N.  B.  w.  Payne,  ill  Mo.  291;  Hately  '. 
Pike,  162  111.  241.  See  §  117  \(.-ii\post.  But  see  N'ational  Bank\ .  Dorset  Marble 
Co..  61  Vt.  106. 

(3)  In  one  or  two  States  it  seems  immaterial  that  the  payee  actually  indorses 
above  the   name  of  the  irregular  indorser.     Bank -v.  Dorset  Marble  Co.,  61    Vt. 

106;  McFctrich  v.  Woodrow,  (N.  H.)  38  Atl.  Rep.  iS. 
///.  Presumption  that  B.  is  a  guarantor.  The  presumption  from  the  appear- 
ance of  the  paper  is  that  the  irregular  indorser  is  a  guarantor.  Blatchford  v. 
Milliken,  35  111.  438;  Kingsland  \ .  Koeppe,  137  111.  344;  Arnold  v.  Bryant,  8  Bush 
(Ky.)  668  (by  statute);  Conger  v.  Babbet,  b-j  Iowa,  13  (by  statute);  Fullerton  v. 
Hill,  48  Kans.  558.  Parol  evidence  is  admissible  to  show  the  actual  contract. 
Milligan  v.  Holbrook,  (111.  1897)  48  N.  E.  Rep.  157.  In  some  States  the  payee  or 
holder  may  treat  the  irregular  indorser  either  as  a  co-maker  or  surety  as  he 
may  elect,  but  parol  proof  may  show  the  true  contract.  Orrick  v.  Colston,  7 
Gratt.  (Va).  189;  Roanoke,  etc.,  Co.  v.  IVatkins,  41  W.  Va.  787;  Miller  v.  Clen- 
denin,  42  W.  Va.  416. 

As  to  whether  an  irregular  indorsement  construed  as  a  guaranty  is  within  the 
statute  of  frauds,  there  is  a  conflict.  That  it  is:  Culbertson  v.  Smith,  52  Md.  628; 
Havden  v.  IVeldon,  43  N.  J.  L.  128;  Hauer  v.  Patterson,  84  Pa.  St.  274.  That  it 
is  not;  Beckwith  v.  Angell.b  Conn.  315;  Stowellw.  Raymond,  83  111.  120;  Peter, 
son  V.  Russell,  62  Minn.  220.  —  Ed. 


V.  2.]  INDORSER.  481 

The  case  was  submitted  to  the  Superior  Court,  and,  after  judg- 
ment for  the  plaintiff,  to  this  court,  on  appeal,  on  agreed  facts,  in 
substance  as  follows: 

Before  the  delivery  of  the  note  Pratt  requested  the  plaintiff  to 
get  it  discounted,  and  the  plaintiff  refused  unless  there  was  a  satis- 
factory indorser.  Thereupon  the  plaintiff  accompanied  Pratt  to  the 
office  of  Gushing,  whom  the  plaintiff  told  that  he  was  going  to  have 
the  note  discounted  for  Pratt,  provided  Pratt  obtained  a  satisfactory 
indorser.  The  plaintiff  asked  Gushing  if  he  was  good  for  the 
amount,  and  Gushing  said  that  he  was,  and  that  the  note  would  be 
paid  when  due;  and  that  he  was  willing  to  indorse  the  note  for  the 
accommodation  of  Pratt,  so  that  the  note  might  be  discounted  for 
his  benefit.  The  note  was  then  indorsed  by  Gushing  at  the  request 
of  Pratt,  and  was  delivered  to  the  plaintiff,  who  thereafter  himself 
indorsed  it  and  had  it  discounted,  and  the  proceeds  were  used  for 
the  benefit  of  Pratt.  The  plaintiff  was  obliged  to  pay  the  note,  and 
Gushing  alone  defended,  Pratt  having  been  defaulted. 

Holmes,  J. — This  is  a  suit  upon  a  note  between  two  persons, 
who  both  became  parties  on  it  for  the  accommodation  of  the  maker. 
The  defendant  Gushing  indorsed  the  note  before  delivery;  the 
plaintiff  is  the  payee,  and  indorsed  after  the  defendant.  If  the 
plaintiff  had  not  known  that  the  defendant  indorsed  the  note  for 
accommodation,  he  would  have  been  entitled  to  recover.  {JVoods 
V.  Woods,  127  Mass.  141.)  Knowledge  of  that  fact  under  the  cir- 
cumstances stated  does  not  affect  his  rights.  In  the  absence  of 
agreement,  successive  indorsers  for  the  accommodation  of  a  third 
person  are  liable  in  the  same  order  as  indorsers  for  value.  [S/una 
v.  Knox,  98  Mass.  214;  Danl.  Neg.  Inst.  [3d  ed.],  §  703.)  The 
conversation  which  took  place  between  the  parties,  so  far  from 
expressing  a  different  agreement,  gave  notice  to  the  defendant  that 
the  plaintiff  required  his  indorsement  as  the  condition  of  becoming 
a  party.  It  fortifies  the  presumption  arising  from  the  face  of  the 
paper.  The  suggestion  on  behalf  of  the  defendant,  that  he  signed 
also  for  the  accommodation  of  the  plaintiff,  perverts,  if  it  does  not 
contradict,  the  agreed  facts.  It  was  urged  that  the  plaintiff  took 
the  note  when  overdue.  But  his  rights  and  liabilities  were  fixed  at 
the  time  of  his  indorsement.  If  the  argument  was  sound,  the  judg- 
ment ought  to  have  been  for  the  defendant-indorser  in  Woods  v. 
Woods. 

Judgment  affirmed.' 

'  Successive  indorsements  import  a  several,  and  not  a  joint,  liability.  A  joint 
action  cannot  be  brouefht  against  successive  indorsers  except  by   aid   of    stat- 

NEGOT.   INSTRUMENTS  —  3I 


482  LIABILITY   OF   PARTIES.  [ART.  VI, 

§  Il8  EASTERLY  v.  BARBER.  [§  68] 

66  New  York,  433.  —  1876. 

Action  by  third  indorserto  recover  of  second  indorser.  The  note 
was  made  by  the  Stevenson  Mfg.  Co.,  payable  to  the  order  of 
Knight,  and  indorsed  by  Knight,  defendant,  plaintiff,  and  one  Mac- 
Dougall.  Defendant  sets  up  that  the  four  were  stockholders  in  the 
Mfg.  Co.,  and  indorsed  to  give  it  credit,  and  under  an  agreement 
that  they  should  be  co-sureties  and  contribute  equally  in  case  the 
indorsers  were  obliged  to  pay.  Knight  and  MacDougall  are 
insolvent.  The  court  allowed  a  recovery  by  plaintiff  against  de- 
fendant for  one-half  the  sum  paid  by  plaintiff.  Plaintiff  claims 
judgment  for  the  whole.  Defendant  claims  judgment  should  lie  for 
one-fourth.     Both  parties  appeal. 

Miller,  J.  — The  first  question  presented  upon  these  appeals  is, 
whether  it  is  competent  in  an  action  by  one  indorser  against  a  prior 
indorser  for  the  defendant  to  prove  by  parol  an  agreement  between 
all  the  indorsers  that  they  were,  as  between  themselves,  co-sureties 
where  they  are  accommodation  indorsers.  '  In  Barry  v.  Ransom  (12 
N.  Y.  462),  it  was  held  that  an  agreement  made  between  parties, 
prior  to  or  cotemporaneously  with  their  executing  a  written  obliga- 
tion as  sureties,  by  which  one  promises  to  indemnify  the  other  from 
loss,  does  not  contradict  or  vary  the  terms  or  legal  effect  of  the 
written  obligation,  and  it  may  be  proved  by  parol  evidence.  It  was 
said  by  Denio,  J.,  in  the  opinion,  that  an  agreement  among  the 
sureties,  arranging  their  eventual  liabilities  among  themselves  in  a 
manner  different  from  what  the  law  would  prescribe,  in  the  absence 
of  an  express  agreement,  would  not  contradict  any  of  the  terms  of 
the  bond.  It  was  also  held,  that  the  engagement  among  themselves 
had  no  necessary  place  in  the  instrument  between  them  and  the 
other  contracting  parties.  The  case  cited  referred  to  a  joint  and 
several  bond,  where  the  obligors  were  equally  liable  upon  its  face. 
No  reason  exists,  however,  why' the  same  principle  is  not  applicable 
to  notes  and  bills  of  exchange.  The  terms  of  the  contract  con- 
tained in  instruments  of  this  character,  which  are  within  its  scope 
to  define  and  regulate,  cannot  be  changed  by  parol;  but  the  under- 
standing between  the  indorsers  is  a  distinct  and  separate  subject,  an 
outside  matter,  which  may  be  properly  proved  independent  of  and 
without  any  regard  to  the  instrument  itself.     This  rule  is  distinctly 

ute.  Wolf  \.  IIos1cttci\  (Pa.  1S97)  37  Atl.  R.  9SS.  Such  statutes  authorizing  the 
joining  of  all  parties  to  a  negotiable  instrument  in  one  action  are  common  in 
the  American  States.  N.  Y.  Code  Civ.  Proc,  §454;  Pomeroy.  Remedies,  PP402- 
410;   3  Randolph,  Comm.  Paper.  §  1669.  —  Ed. 


V.  2.]  INDORSER.  483 

established  in  reference  to  joint  makers  of  promissory  notes;  and 
altliough  the  previous  decisions  had  been  somewhat  uncertain  it  has 
been  recently  determined  by  the  decision  of  this  court  that  where  a 
person  signed,  as  surety,  a  joint  and  several  promissory  note,  and  it 
did  not  appear  by  the  instrument  itself  that  such  relation  existed,  he 
might  prove  such  fact  by  parol,  and  that  such  proof  did  not  tend  to 
alter  the  terms  of  the  contract.  {Hubbard  \\  Gi{rncy,6^'^ .  Y.  457.) 
It  is  not  apparent  that  any  such  difference  exists  between  the  two 
classes  of  cases  which  prevents  the  application  of  the  same  principle 
to  both  of  them. 

An  attempted  distinction  is  sought  to  be  maintained  because  the 
relation  of  indorsers  to  each  other  are  fixed  by  law;  while  the  rela- 
tions and  obligations  of  sureties  and  obligors  are  not  fixed.  As 
between  the  principal  and  the  sureties  they  are  fixed  quite  as  much 
as  between  indorsers,  and  can  only  be  settled  as  between  sureties, 
where  the  contract  does  not  show  the  fact,  by  parol  proof  of  the 
same.  In  support  of  the  same  views  is  the  case  of  Philips  v.  Pres- 
ton (5  How.  [U.  S.]  278,  292),  where  the  doctrine  is  laid  down  that 
proof  of  a  collateral  contract,  by  parol,  may  be  given  to  show  the 
liability  of  indorsers  as  between  themselves.  (See,  also,  McDonald 
V.  Magruder,  3  Peters,  470;  Aiken  \ .  Barkly,  2  Speers,  747;  £de/en 
v.  JF/iiie,  6  Bush  [Ky.]  408;  Davis  v.  Morgan,  64  N.  C.  570.) 
The  indorsements  upon  bills  of  exchange  or  promissory  notes  rest 
upon  the  theory  that  the  liability  of  indorsers  to  each  other  is 
regulated  by  the  position  of  their  names,  and  that  the  paper  is  trans- 
ferred from  the  one  to  the  others  by  indorsement.  But  this  rule  has 
no  practical  application  to  accommodation  indorsers,  where  neither 
of  them  has  owned  the  paper  and  no  such  transfer  has  been  made.  It 
is  easy  to  see  that  the  application  of  the  rule  contended  for,  in  many 
cases  would  work  the  most  serious  injustice.  Suppose  a  person  sign 
as  accommodation  maker  of  a  promissory  note,  and  the  payee  for 
whose  benefit  it  is  made  indorses  it  and  pays  the  note,  and  after- 
wards sues  the  maker  to  recover  back  the  money,  would  it  be 
seriously  contended  that  proof  could  not  be  given  to  show  that  he 
was  merely  an  accommodation  maker?  Clearly  not;  and  yet  such 
evidence  would  contradict  the  written  instrument  quite  as  much  as 
it  would  to  prove  an  agreement  between  indorsers  in  regard  to  their 
liability  as  between  each  other.  Cases  frequently  arise  where  it  is 
competent  to  prove  that  the  indorsement  is  made  for  the  accommo- 
dation of  the  maker;  and  a  drawee  may  show,  after  acceptance,  that 
he  has  no  funds  (t,  N,  Y.  423),  in  his  hands,  and  that  he  was  merely 
an  accommodation  acceptor.  {Griffith  v.  Reed,  21  Wend.  502.)  The 
cases  to   which   we  have  been  referred  by  the  plaintiff's  counsel  do 


484  LIABILITY   OF   PARTIES.  [ART.  VI. 

not,  we  think,  sustain  the  position  contended  for;  that  parol  proof 
cannot  be  given  to  show  an  arrangement  between  accommodation 
indorsers  different  from  that  which  appears  by  the  legal  effect  of  the 
instrument,  and  a  particular  examination  of  them  is  not  required. 
The  uniform  practice  in  this  State  has  been  in  conformity  to  the 
views  expressed  in  reference  to  proof  of  this  character,  and  it  would 
be  establishing  a  new  rule  at  this  time  to  hold  that  such  testimony 
was  incompetent.  There  was,  therefore,  no  error  committed  by  the 
judge  in  the  admission  of  the  evidence  to  which  objection  was 
taken. 

Other  questions  arise  upon  the  defendant's  appeal,  which  should 
be  considered.  It  is  claimed  that  an  action  at  law  by  a  surety  for 
contribution  must  be  against  each  of  the  sureties  separately  for  his 
proportion,  and  that  no  more  can  be  recovered,  even  where  one  or 
more  are  insolvent.  In  the  latter  case,  the  action  must  be  in  equity 
against  all  the  co-sureties  for  contributions,  and,  upon  proof  of  the 
insolvency  of  one  or  more  of  the  sureties,  the  payment  of  the  amount 
will  be  adjudged  among  the  solvent  parties  in  due  proportion.  The 
principle  seated  is  fully  sustained  by  the  authorities.  It  is  thus 
stated,  in  Parsons  on  Contracts  (vol.  i,  p.  34):  "  At  law,  a  surety 
can  recover  from  his  co-surety  an  aliquot  part,  calculated  upon  the 
whole  number,  without  reference  to  the  insolvency  of  others  of  the 
co-sureties;  but  in  equity  it  is  otherwise."  (See,  also,  Browne  v. 
Lee,  6  Barn.  &  Cress.  689;  13  Eng.  C.  L.  394;  Coiucll  v.  Edwards, 
2  B.  &  Pull.  26S;  Bcainan  v.  Blanchard,  4  Wend.  432,  435;  Story's 
Eq.  Juris.,  §  496;  i  Chitty  on  Con.  (5th  Am.  ed.)  597,  598;  Willard's 
Eq.  Juris.,  108.)  There  seems  to  be  a  propriety  in  the  rule  that 
where  sureties  are  called  upon  to  contribute,  and  some  of  them  are 
insolvent,  that  all  the  parties  should  be  brought  into  court  and  a 
decree  made  upon  equitable  principles  in  reference  to  the  alleged 
insolvency.  There  should  be  a  remedy  decreed  against  the  insolvent 
parties,  which  may  be  enforced  if  they  become  afterwards  able  to 
pay,  and  this  can  only  be  done  in  a  court  of  equity  and  when  they 
are  parties  to  the  action.  The  action  here  was  not  of  this  character; 
nor  were  all  the  proper  parties  before  the  court.  It  was  clearly  an 
action  at  law,  and  in  that  point  of  view,  as  we  have  seen,  the  plain- 
tiff could  only  recover  for  one-fourth  of  the  debt  for  which  all  the 
sureties  were  liable.  The  distinction  between  the  two  classes  of 
actions  is  recognized  by  the  decisions. 

The  remedies,  the  parties  and  course  of  procedure  are  each  differ- 
ent. In  the  one,  a  jury  trial  is  a  matter  of  right;  while  in  the  other 
the  trial  i<^  bv  the  court.  The  costs  are  also  in  the  discretion  of  the 
court      (Code,  §§  253,  306;  13  N.  Y.  {^siipra^  498.)     As  the  judgment 


V.  2.]  INDORSER.  485 

could  not  require  each  of  the  parties  to  pay  his  aliquot  share  and 
furnish  a  remedy  over  against  those  who  were  insolvent  and  the 
rights  of  the  parties  be  finally  determined  and  fixed,  it  was  under  the 
facts  proven  clearly  erroneous.  Although  in  many  cases  under 
the  Code  the  pleadings,  if  necessary,  may  be  made  to  conform  to 
the  facts,  and  the  case  disposed  of  upon  the  merits,  the  defects  here 
are  so  radical  as  to  strike  at  the  very  foundation  of  the  action,  and 
cannot  thus  be  remedied.  Besides,  the  proper  parties  are  not 
before  us,  and  cannot  be  brought  in,  except  on  motion  in  the  court 
below.  As  the  claim  was  alleged  in  the  complaint,  there  was  no 
such  defect  of  parties  apparent  as  required  the  defendant  to  take  the 
objection  by  demurrer  or  answer. 

It  follows  that  the  judgment  must  be  affirmed  upon  the  plaintiff's 
appeal,  with  costs  of  appeal  to  be  paid  by  the  plaintiff  upon  the  final 
termination  of  the  action,  if  the  defendant  succeeds;  and  if  the  plain- 
tiff succeeds,  to  be  set  off  against  the  plaintiff's  costs.  And  the 
judgment  must  be  reversed  upon  the  defendant's  appeal,  with  cost 
of  the  appeal  in  this  court,  and  costs  in  the  Supreme  Court  to  abide 
the  event. 

All  concur,  except  Church,  Ch.  J.,  dissenting. 

Ordered  accordingly.' 


§118  LANE  z;.  STACY.  [§68] 

8  Allen  (Mass.),  41.  —  1S64. 

Bill  in  equity  to  compel  defendant  to  assign  to  plaintiff  one-half 
the  security  given  to  protect  plaintiff  and  defendant's  intestate  as 

'  An  agreement  for  co-suretyship  among  accommodation  indorsers  may  be 
shown  by  parol.  Clapp  v.  Rice,  13  Gray  (Mass.)  403;  Paul  v.  Rider,  58  N.  H. 
119;  Kelley  v.  Fetv,  18  Ohio,  441;  Ross  v.  Espy,  66  Pa.  St.  4S1;  Preston  v  Gould, 
64  Iowa,  44;  Rhiiiehart  v.  Schall,  6g  Md.  352.  Contra:  Johnson  v.  Ramsey,  43 
N.  J.  L.  279. 

In  a  few  States  the  presumption  is  that  successive  accommodation  indorsers 
are  co-sureties.  Daniel  v.  McRae,  2  Hawks  (N.  Car.)  590;  Richards  v.  Simms, 
I  Dev.  &  B.  (N.  Car.)  48;  Dawson  v.  Pettway,  4  Dev.  &  B.  (N.  Car.)  396; 
Douglas  V.  Waddle,  i  Ohio,  413,  as  qualified  in  case  of  bill  of  exchange  in  Wil- 
liams V.  Bosson,  II  Oh.  67,  and  Barnet  v.  Young,  29  Oh.  St.  7;  Freeman  v. 
Cherry,  46  Ga.  14  (statutory).  See  also  Machado  v.  Fernandez,  74  Calif.  362; 
Leeke  v.  Hancock,   76  Calif.  127. 

Most  jurisdictions  refuse  to  hear  parol  evidence  to  qualify  the  nature  of  an 
indorsement,  as  to  show  that  it  was  without  recourse,  or  as  surety,  or  guarantor, 
etc.  I  Daniel  on  Neg.  Inst.,  §  719.  A  few  States  hold  to  the  contrary.  Holmes 
V.  Lincoln  F.  N.  Bank,  38  Neb.  326;  Cake  v.  Pottsznlle  Bank,  116  Pa.  St.  264- 
Tru/nan  v.  Bishop,  83  Iowa,  697.  —  Ed. 


486  LIABILITY    OF    PARTIES.  [ART.  VI 

payee-indorsers  of  a  note.  The  note  was  made  b}-  the  mortgagor  to 
plaintiff  and  the  intestate,  and  by  them  indorsed.  The  mortgage  was 
given  to  the  intestate  without  plaintiff's  knowledge. 

Hoar,  J.  —  It  is  not  denied  by  the  defendant  that  a  surety  is 
entitled  to  share  in  the  benefit  of  the  security  taken  by  his  co-surety. 
But  he  contends  that  his  intestate  was  not  the  co-surety  of  the 
plaintiff;  and  relies  upon  the  well-settled  rule  that  the  liability  of 
successive  indorsers  upon  a  note  is  fixed  by  the  contract  which  the 
position  of  their  names  upon  the  paper  establishes,  and  that,  unless 
by  express  agreement,  one  is  not  bound  to  contribute  to  a  payment 
of  the  note  by  the  other,  even  if  both  are  accommodation  indorsers. 
The  principle  is  sound,  but  has  no  application  to  the  case  at  bar. 
Stacy  and  Lane  are  not  successive  indorsers.  They  are  joint 
indorsers.  The  note  was  made  payable  to  their  joint  order,  and 
could  only  be  transferred  by  their  joint  act.  Which  name  is  first  put 
upon  the  paper  is  therefore  immaterial,  as  by  the  indorsement  they 
incurred  a  joint  responsibility  for  the  debt  of  the  promisor.  Each 
is  therefore  entitled  to  share  in  the  security  taken  by  the  other. 

Decree  according  to  the  prayer  of  the  plaintiff's  bill.' 


VI.  Acceptor  for  honor. 

See  §  284  [165],/^^/.,  pp.  651-657. 


VII.  Guarantor. 

I.   (a)  Does  a  Guaranty-Indorsement  by   the  Holder  Trans- 
fer Title? 

Trust  Co.  7'.  National  Bank,  ioi  U.  S.  68,  ante,  p.  346. 
Elgin  City  Banking  Co.  v.  Zei.ch,  57  Minn.  487,  aiife,  p.  347. 
Johnson  v.  Mitchell,  150  Tex.  212,  a/tu,  p.  369. 

I     (3)  May  a  Guaranty  be  Written  Above  a  Blank  Indorse- 
ment? 

Belden  v.  Hann,  61  Iowa,  42,  a>!U',  p.  352. 
Scott  r.  Calkin,  139  Mass.  529,  (jiitt-,  p.  353. 
Clarke  z'.  Patrick,  60  Minn.  269,  anfe,  p.  354. 

'  See  Neg.  Inst.  L.,  §  71  [41].     This  section  (iiS  [68] )  changes  the   law  to  the 
extent  of  rendering  the  obligation  joint  and  several  instead  of  joint.  —  Ed. 


VII.]  GUARANTOR.  48/ 

2.  Is  A  Transferee  a  Holder  in  Due  Course? 

Trust  Co.  v.  National  Bank,  ioi  U.  S.  68,  ante,  p.  346. 
Elgin  City  Banking  Co.  v.  Zelch,  57  Minn,  4S7,  ante,  p.  347. 
Dunham  v.  Peterson,  5  N.  Dak.  414. 


3.  What  is  the  Contract  of  the  Guarantor?  • 

BROWN  V.  CURTISS. 

2  New  York,  225.  —  1849. 

Action  against  defendant  as  guarantor  of  a  promissory  note. 
Defendant  was  payee  of  the  note.  He  wrote  upon  it,  "I  guaranty 
the  payment  of  the  within;  Charles  Brown,"  and  transferred  it  to 
plaintiff  in  payment  of  a  debt.  No  demand  on  the  maker,  or  notice 
of  non-payment  to  defendant.  Defendant  offered  to  show  that  for 
several  years  after  the  note  fell  due  the  maker  was  solvent;  that  he 
then  failed,  and  was  insolvent  at  this  time.  Evidence  excluded. 
Judgment  for  plaintiff. 

Bronson,  J.  —  It  is  said,  on  the  one  side,  that  the  defendant  is  the 
maker  of  a  promissory  note,  and  liable  as  such;  and  on  the  other 
side,  that  he  is  an  indorser,  and  has  been  discharged  for  the  want  of 
demand  and  notice.  And  strange  as  it  may  seem,  there  are  cases  in 
the  books  which  go  to  uphold  both  of  these  positions.  But  they 
are  both  wrong.  The  defendant  is  neither  maker  nor  indorser 
of  a  promissory  note.  On  the  contrary,  he  has  in  very  plain  terms 
made  a  contract  of  a  different  kind  from  either  of  those  —  one  well 
known  to  the  law;  and  by  that  contract  he  must  either  stand  or  fall. 
He  has  guarantied  the  payment  of  G.  F.  Brown's  note;  and  we  have 
no  right  to  turn  that  contract  into  one  of  a  different  kind.  This  is 
so  plain  a  principle  that  it  would  seem  to  be  enough  to  mention  it,  with- 
out saying  anything  more.  And  yet  there  are  cases  which  hold,  that 
the  guarantor  of  a  promissory  note  may  sometimes  be  treated  as 
maker,  and  some  times  as  indorser.  This  has  usually  been  allowed 
for  the  purpose  of  giving  effect  to  the  supposed  intention  of  the 
parties,  as  ascertained  from  extrinsic  evidence;  though  there  has  not 
always  been  so  fair  an  apology  for  altering  the  contract.  But  on 
whatever  ground  the  courts  may  have  acted,  it  is  a  dangerous  pro- 
ceeding. At  the  very  best,  it  violates  the  salutary  rule,  that  all  prior 
negotiations  between  the  parties  are  to  be  deemed  merged  in  the 
final   written  agreement;  and  allows  that  agreement  to  be  overruled 


488  LIABILITY    OF   PARTIES.  [ART.  VI. 

by  the  conversations  which  preceded  it.  If  the  parties  liave  made 
a  mistake  in  drawing  up  their  contract,  the  instrument  may  be 
reformed  in  equity,  by  a  direct  proceeding  for  that  purpose.  But 
the  courts  can  have  no  right,  under  color  of  construing  the  agree- 
ment, to  say  that  it  means  something  else  from  what  the  language 
of  the  instrument  plainly  imports.  I  have  contended  earnestly, 
though  not  always  with  success,  for  this  doctrine.  {Scabiiry  v. 
Hungerfoj'd,  2  Hill,  So;  Miller  v.  Gaston,  Id.  188;  Alanrow  v.  Dur- 
ham,  3  Id.  587;  Lcggctt  v.  Raymond,  6  Id.  639.)  But  the  side  of 
truth  and  principle  will  sooner  or  later  prevail;  and  the  decisions  of 
the  court  of  errors  in  Hall  x.  Newcomb  (7  Hill,  416;  3  Id.  233,  s.  c), 
and  of  this  court  in  Spies  \.  Gilmorc  (i  Comst.  321),  have  greatly 
shaken,  if  they  have  not  entirely  overthrown  the  cases  in  which  the 
courts  have  taken  the  liberty  to  remodel  the  contract  of  the  parties. 
Those  cases  have  never  had  any  ground  of  principle  to  stand  on,  and 
I  trust  they  will  never  again  be  cited  as  authority  in  this  state. 

I  do  not  mean  that  the  very  words  of  an  agreement  are  always  to 
be  followed.  Construction  is  often  necessary  for  the  purpose  of 
ascertaining  what  the  parties  intended  by  the  words  which  they 
used.  But  when  the  meaning  of  the  instrument  has  been  ascer- 
tained, the  ofifice  of  construction  is  at  an  end;  and  the  contract  can 
only  be  enforced  as  the  parties  have  made  it.  The  defendant  has 
very  plainly  contracted  as  a  guarantor.  If  he  is  not  liable  as  such,  he 
is  not  liable  at  all;  and  if  he  is  liable  as  such,  he  cannot  get  rid  of 
the  obligation  by  calling  himself  an  indorser,  or  anything  else. 

The  undertaking  of  the  defendant  was  not  conditional,  like  that 
of  an  indorser;  nor  was  it  upon  any  condition  whatever.  It  was 
an  absolute  agreement  that  the  note  should  be  paid  by  the  maker  at 
maturity.  When  the  maker  failed  to  pay,  the  defendant's  contract 
was  broken,  and  the  plaintiff  had  a  complete  right  of  action  against 
him.  It  was  no  part  of  the  agreement  that  the  plaintiff  should  give 
notice  of  the  non-payment;  nor  that  he  should  sue  the  maker,  or  use 
any  diligence  to  get  the  money  from  him.  The  cases  in  Massachu- 
setts, Maine,  and  Pennsylvania,  which  hold  a  different  doctrine, 
{Oxford  Bank  v.  Haynes,  8  Pick.  423;  Talbot  v.  Gay,  18  Id.  534; 
Gamage  v.  Hiitchins,  23  Maine,  565;  Gibbs  v.  Cannon,  9  Serg.  &  R. 
198;  Isett  V.  Hogc,  2  Watts,  128),  are  not  law  in  this  State.  With 
us,  proceedings  against  the  maker  are  only  necessary  where  there  is 
a  guaranty  of  eollection.'  The  point  was  decided  long  ago  that  a 
guaranty  oi payment,  like  the  one  in  question,  is  not  conditional,  but 
an  absolute  undertaking  that  the  maker  will  pay  the  note  when  due. 

*  Sylvester  v.  Do'oner,  18  Vt.  32;   Forest  v.  Stezuart,  14  Oh.  St.  246.  —  Ed. 


VII. J  GUARANTOR.  489 

i^AUen  V.  Rightincre,  20  John.  365.)  '  All  of  our  cases  go  upon  that 
ground.  Some  of  them  go  so  far  as  to  hold,  that  the  guarantor 
may  be  treated  as  the  maker  of  a  promissory  note  I^Manroiu  v. 
Durham,  3  Hill,  584;  Luqucer  v.  Prosscr,  4  Hill,  420;  i  Id.  256.) 
That  doctrine  cannot  be  defended.  Although  the  undertaking  is 
absolute,  it  differs  essentially  from  a  promissory  note.  The  guarantor 
does  not  promise  to  pay  himself,  but  that  the  maker  will  pay.  Still, 
such  cases  prove  that  our  courts  are  far  enough  from  holding  the 
contract  to  be  conditional.  It  follows  from  what  has  been  said,  that 
the  evidence  offered  by  the  defendant  was  properly  excluded.  Proof 
that  when  the  note  became  due,  and  for  several  years  afterwards, 
the  maker  was  abundantly  able  to  pay,  and  that  he  had  since  become 
insolvent,  would  be  no  answer  to  this  action.  The  defendant  was 
under  an  absolute  agreement  to  see  that  the  maker  paid  the  note  at 
maturity. 

If  there  had  been  an  indorser  on  the  note  prior  to  the  guaranty, 
and  the  plaintiff  had  allowed  him  to  be  discharged  by  neglecting  to 
demand  payment  and  give  him  notice,  it  may  be  that  the  defendant 
would  have  had  a  good  answer  to  the  action.  But  it  is  not  neces- 
sary to  consider  that  question;  for  there  was  no  indorser,  and 
nothing  has  been  done  or  omitted  to  discharge  the  maker.  If  the 
defendant  wished  to  have  him  sued,  he  should  have  taken  up  the 
note,  and  brought  the  suit  himself.  The  plaintiff  was  under  no 
obligation  to  institute  legal  proceedings. 

The  only  remaining  question  is  on  the  statute  of  frauds.  (2  R.  S. 
135,  §  2.)  If  the  case  is  within  the  statute,  it  is  impossible  to  get 
over  the  objection  that  no  consideration  is  expressed  in  the 
guaranty.  I  know  it  was  held  in  Manrow  v.  Durhatn  (3  Hill,  5S4), 
that  a  guaranty  like  this  was  a  promissory  note,  which  imports  a 
consideration,  and  was  therefore  valid.  But  that  case,  which  has 
been  questioned  elsewhere  (Story,  Prom.  Notes,  597),  as  well  as  at 
home,  cannot  be  law.  An  undertaking  that  another  man  will  perform 
his  contract  is  not  a  promissory  note.  It  is  not  within  any  definition 
which  was  ever  given  of  a  promissory  note,  and  it  cannot  be  held  to 
be  such,  without  confounding  all  legal  distinctions  in  relation  to 
the  nature  of  contracts. 

'Accord:  Bank  v.  Hopson,  53  Conn.  453;  Hance  v.  Miller,  21  III.  636;  Studa- 
baker  v.  Cody,  54  Ind.  586;  Roberts  v.  Hazvkins,  70  Mich.  566;  Clay  v .  Edgerton, 
19  Oh.  St.  549. 

Contra:  (Contract  conditional)  Crooks  v.  Tully,  50  Calif.  254;  Rockford  iV.  B.  v. 
Gaylord,  34  Iowa,  246;  Newton  Wagon  Co.  v.  Dicrs,  10  Neb.  2S4;  Mizncr  v.  Spier, 
96  Pa.  St.  533;  cases  from  Me.,  Mass.,  and  Pa.,  criticised  in  the  principal  case. 
But  the  guarantor  may  waive  the  holder's  laches.  Sigourney  v.  IVetherell, 
6  Met.  (Mass.)  553;  Pattillo  v.  Alexander,  96  Ga.  60.  —  Ed. 


490  LIABILITY    OF    PARTIES.  [ART.  VI. 

But  I  think  the  statute  of  frauds  does  not  apply  to  this  case. 
Although  in  form  this  is  a  promise  to  answer  for  the  debt  or  default 
of  another,  in  substance  it  is  an  engagement  to  pay  the  guarantor's 
own  debt,  in  a  particular  way.  He  does  not  undertake  as  a  mere 
surety  for  the  maker;  but  on  his  own  account,  and  for  a  considera- 
tion which  has  its  root  in  a  transaction  entirely  distinct  from  the 
liability  of  the  maker.  The  defendant  was  a  debtor  to  the  plaintiff, 
and  gave  the  note,  with  the  guaranty,  to  satisfy  that  debt.  This 
belongs  to  the  third  class  of  cases  mentioned  by  Kent,  Ch.  J.,  in 
Leonard  \ .  Vredenburgh  (8  John.  38,  39).  There  was  a  new  and  dis- 
tinct consideration,  independent  of  the  debt  of  the  maker,  and  one 
moving  between  the  parties  to  the  new  promise.  In  such  cases, 
where  the  party  undertakes,  for  his  own  benefit,  and  upon  a  full  con- 
sideration received  by  himself,  the  promise  is  not  within  the  statute. 
It  would  be  good  without  any  writing.  The  point  was  decided  by 
the  Supreme  Court  in  yohnson  v.  Gilbert  (4  Hill,  178),  and  I  do  not 
think  it  necessary  to  refer  to  other  cases  holding  the  same  doctrine.' 

The  case  of  Manrow  v.  Durham  might  have  been  placed  upon  the 
same  ground  on  which  I  have  put  this,  if  Durham  alone  had  signed 
the  guaranty.       He  made  the  promise   upon   a   new   consideration, 

'  "  The  reasoning  to  take  this  promise  out  of  the  statute  is  quite  subtle,  and 
I  should  have  much  difficulty  in  yielding  it  my  assent,  but  for  the  authorities 
which  I  think  ought  now  to  control." — Earl,  J.,  in  Milks  v.  Rich,  80  N.  Y.  269, 
271.  See  also  Darst  v.  Bates,  95  111.  493;  Sheldon  v.  Butler,  24  Minn.  513; 
Wvmaji  V.  Goodrich,  26  Wis.  21;  Hassinger  v.  Neivnian,  83  Ind.  124;  cf.  Dozos  v. 
Siii:tt,  134  Mass.  140. 

One  who  signs  as  surety  with  the  maker  is  liable  as  an  original  promisor;  the 
statute  of  frauds  does  not  apply  to  the  case.  Casey  v.  Brabason,  10  Abb.  Pr. 
(N.  Y.)  368;  Freeh  v.  Yazvger,  47  N.  J.  L.  157;  Paul  v.  Stackhouse,  38  Pa.  St. 
302. 

Where  one,  not  the  payee  or  holder,  signs  a  guaranty  upon  the  instrument 
there  are  two  cases,  (i)  If  signed  before  delivery,  it"  requires  no  other  consider- 
ation to  support  it,  and  need  express  none  other,  (even  where  the  statute  requires 
the  consideration  of  the  guaranty  to  be  expressed  in  writing),  than  the  consider- 
ation which  the  note  upon  its  face  implies  to  have  passed  between  the  original 
parties.  (2)  But  a  guaranty  written  upon  a  promissory  note  after  the  note  has 
been  delivered  and  taken  effect  as  a  contract,  requires  a  distinct  consideration 
to  support  it;  and  if  such  a  guaranty  does  not  express  any  consideration,  it  is 
void,  where  the  statute  of  frauds  requires  the  consideration  to  be  expressed  in 
writing." — Moses  \.  Lawrence  County  Bank,  149  U.  S.  2gS;  cf.  Scott  v.  Calkin, 
139  Mass.  529,  ante,  p. 

.^n  oral  acceptance  without  consideration  has  been  held  to  be  within  the  stat- 
ute. Manley  v.  Geagan,  105  Mass.  445;  Walton  v.  Mandeville,  56  Iowa,  597. 
Contra:  Jarvis  v.  Wilson,  46  Conn.  90.  An  oral  acceptance  upon  consideration 
ts  held  not  to  be  within  the  statute.  McCutchen  v.  Rice,  56  Miss.  455;  Nelson  v. 
First  Baiik,  48  111.  36;  Louisville  Co.  v.  Caldwell,  98  Ind.  245;  /;;  re  Goddard,  66 
Vt.  415.  —  Ed. 


VII.]  GUARANTOR.  49I 

moving  between  the  plaintiff  and  himself.  But  Moulthrop,  the  other 
defendant,  was  a  mere  surety,  and  as  to  him  the  case  was  clearly 
within  the  statute. 

Strong,  J.,  also  delivered  an  opinion. 

Jewett,   Ch.   J.,    and    Gardner,    J.,  were    of    opinion    that  the 
guaranty  was  within  the  statute  of  frauds,  and  therefore  void. 

Judgment  affirmed. 


4.   Is  the  Guaranty  Transferable? 
[a)  Is  it  negotiable  ?  ' 

TRUE  V.  FULLER. 
21  Pickering,  140.  —  1S38. 

Shaw,  C.  J.,  delivered  the  opinion  of  the  court.  The  facts  bear- 
ing upon  this  question  may  be  thus  stated.  Morse  made  three 
promissory  notes  to  Elisha  Fuller,  or  his  order,  payable  in  two,  three 
and  five  years,  respectively,  from  date,  and  gave  a  mortgage  to  secure 
the  payment  of  them.  The  notes  were  indorsed  in  blank  by  the 
payee.  On  the  same  notes  was  indorsed  a  guaranty  in  this  form: 
"  I  guaranty  the  payment  of  semi-annual  interest  on  this  note,  as 
well  as  the  principal,"  and  signed  by  the  defendant.  The  notes  thus 
indorsed  were  transferred,  and  the  mortgage  assigned.  The  mort- 
gaged premises  were  entered  on  for  breach  of  condition,  and  the 
mortgage  foreclosed.  The  notes  have  regularly  come  to  the  hands 
of  the  plaintiff. 

The  Court  are  of  opinion  that  the  plaintiff  is  not  entitled  to 
recover,  because  the  guaranty  in  question  was  not  made  to  him,  or 
whilst  he  was  holder  of  the  note;  that  it  was  not  negotiable  in  itself, 
and  was  not  made  so  by  being  written  upon  and  intended  to  secure 
a  negotiable  instrument.  This  instrument  being  filled  up  and 
signed,  is  complete  in  itself,  and  it  cannot  be  altered,  either  by 
striking  out  words  so  as  to  convert  it  into  a  geheral  indorsement, 
or  by  filling  up,  as  in  case  of  a  blank  indorsement.  In  the  latter 
case,  an  indorser,  by  leaving  a  blank  over  his  name,  tacitly  agrees 
that  any  subsequent  lawful  holder  may  insert  suitable  words  to 
render  him  liable  in  the  same  manner  and  to  the  same  extent, 
implied  by  his  indorsement  and  the  usages  of  business. 

'  Whether  it  be  a  guaranty-indorsement  by  a  holder,  or  be  written  on  the  bill 
by  a  third  party,  seems  immaterial  when  this  question  is  involved.  —  Ed. 


492  LIABILITY    OF    PARTIES.  [ART.  VI. 

This  guaranty  expresses  no  consideration,  nor  does  it  name  any 
person  as  the  guarantee,  to  whom  it  is  made.  But  suppose  these 
could  be  supplied  by  parol  proof,  it  could  only  enure  to  the  person 
who  was  the  holder  at  the  time  the  guaranty  v/as  given,  who  was 
not  the  plaintiff. 

Had  the  defendant  intended,  by  the  credit  of  his  name,  to  give  a 
general  currency  to  the  note,  as  a  negotiable  security,  there  was  no 
reason  why  he  should  not  have  indorsed  it  generally,  in  which  case 
he  would  have  been  responsible  to  any  person  who  might  afterwards 
become  the  holder.  As  it  is,  it  is  no  more  a  negotiable  promise 
than  if  it  had  been  written  on  a  separate  paper,  referring  to  the  note, 
and  guarantying  it  to  the  then  holder.  {Tyler  v.  Bin/iey,  7  Miss.  R. 
479;  Lamoiirieiix  V.  Hewit,  5  Wend.  307.) 

Plaintiff  nonsuit.' 


(b)  Is  it  assignable? 

COOPER  V.  DEDRICK. 

22  Barbour  (N.  Y.  Sur.  Cr.),  516.  —  1856. 

By  the  Courts  Marvin,  J. — The  action  was  upon  a  guaranty, 
written  upon  a  promissory  note.     The  note  reads  thus:  — 

$58.26.      Due    Dedrick   &    Bronson,    or  bearer,    fifty-eight  and   twenty-six   one 
liundredths  dollars,  for  value  received. 

J.  S.  Stillman. 
[The  guaranty  is,  that] 

For  value  received,  I  hereby  guarantee  the  payment  of  the  within  note.  Feb. 
19,  1849. 

(Signed  by  Defendant.) 

Upon  the  trial  the  plaintiffs  produced  the  note  and  proved  the 
guaranty  written  upon  it,  and  rested.  [Defendant  asked  for  nonsuit: 
(i)  That  there  was  no  evidence  of  the  maker's  signature;  (2)  that 
plaintiffs  showed  no  title  or  interest  in  the  guaranty.]  ^  The  justice 
gave  judgment  in  favor  of  the  plaintiffs. 

Several  objections  are  made  to  the  judgment.  It  will  not  be 
necessary  to  state  them  particularly.  It  was  not  necessary  to 
prove  by  witnesses  the  signature  of  the  maker  of  the  note.  This 
was    sufficiently  proved,   as  against  the  defendant,   by  proving  his 

'  Accord:  M'Doalx.  Vt'onians,  S  Watts.  (Pa.)  361;  Irish  v.  Cutter,  31  Me.  536. 
Contra:  IVcI'stcr  v.  Cohb,  17  111.  459;  Donnerherg  v.  Oppenheimer,  15  Wash.  290. 
See  2  Daniel  on  Neg.  Inst.,  §§  1774-1784.  —  Ed. 

''■  Other  questions  omitted.  —  Ed. 


VII.]  GUARANTOR.  493 

execution  of  the  guaranty.  (Cowen  &  Hill's  Notes,  notes  i68,  869, 
912.)     ... 

As  to  the  evidence  of  their  title  to  the  guaranty,  the  note  was 
payable  to  Dedrick  &  Bronson,  or  bearer,  and  the  guaranty 
was  written  upon  it.  The  possession  and  production  of  the  note 
\\d.s  prima  facie  evidence  of  title  in  the  plaintiffs,  and  as  the  guaranty 
was  upon  the  note,  in  my  opinion,  the  possession  of  the  note 
and  the  guaranty  were  prima  facie  evidence  of  right  in  the  plain- 
tiffs to  the  guaranty.  Since  the  code,  the  real  party  in  interest 
is  to  bring  the  action.  The  old  question,  therefore,  whether  the 
form  of  the  contract  justifies  the  action  in  the  name  of  the  plaintiffs, 
no  longer  exists;  but  the  question  is,  has  the  plaintiff  the  title  or 
right  to  the  contract  or  the  cause  of  action.  If  he  has,  he  may 
maintain  the  suit,  upon  the  contract,  in  his  own  name.  In  my 
opinion,  when  a  guaranty  is  written  upon  a  note  and  the  note  is 
transferred,  nothing  being  said  touching  the  guaranty,  the  contract 
of  guaranty  passes  with  the  note.  In  other  words,  the  sale  and 
delivery  of  the  note  with  the  guaranty  upon  it  l\xrmsh.QS  prima  facie 
evidence  of  a  sale  of  the  contract  of  guaranty.  In  the  present  case 
the  defendant  was  one  of  the  payees  of  the  note,  and  the  note  was 
also  payable  to  bearer.  He  transferred  the  note  and  guarantied  the 
payment.  In  my  opinion,  any  one  who  should  become  the  holder 
of  the  note  could  maintain  an  action  upon  the  guaranty,  unless  it 
should  be  shown  that  the  contract  of  guaranty  was  not  transferred 
at  the  time  the  note  was  transferred.  {See  McLaren  v.  Watson,  26 
Wend.  425.) 

The  statute  of  limitations  did  not  commence  running  in  favor  of 
the  defendant  until  the  cause  of  action  accrued  upon  the  contract 
of  guaranty. 

The  contract  of  guaranty  was  not  within  the  statute  of  frauds. 
The  consideration,  "  for  value  received,"  was  sufficiently  expressed 
to  satisfy  the  requirement  of  the  statute.  {Douglass  v.  Howland,  24 
Wend.  35;    WatsotisExrsv.  McLaren,  19  id.  557.) 

The  judgment  should  be  affirmed.' 


EvERSON  V.  Gere,  122  N.  Y.  290.  — 1890.  A.  indorsed  and 
delivered  a  negotiable  promissory  note  to  C,  attached  to  which  was 
an  allonge  containmg  this  guaranty:  "  For  value  received  of  C,  we 
do  hereby  guarantee  to  said  C.   the  payment  of  the  note   hereto 

'  Accord:  Harbord  \ .Cooper,  43  Minn.  466;  Phelps  v.  Sargent,  (Minn.)  71  N.  W. 
Rep.  927.  —  Ed. 


494  LIABILITY    OF   PARTIES.  [ART.  VI. 

annexed,  etc."  (Signed  by  defendants.)  C.  indorsed  the  note  to 
plaintiif  "  without  recourse, "and  executed  and  deUvered  an  assign- 
ment of  the  same  and  the  guaranty.  In  an  action  by  plaintiff  against 
defendants  on  the  guaranty,  the  trial  court  granted  a  nonsuit  on  the 
ground  that  the  guaranty  was  special,  personal  to  C,  and  did  not 
pass  to  plaintiff,  and  that  no  cause  of  action  had  accrued  on  the 
guaranty  at  the  time  of  the  assignment.  Held :  Error.  As  the  note 
and  guaranty  are  to  be  construed  together,  and  as  the  note  is  not 
personal  and  special,  but  general  and  negotiable,  the  guaranty  is 
also  to  be  regarded  as  general  and  will  therefore  pass  by  assignment.' 


5.   Defences  Available  to  Guarantor. 
PUTNAM  V.  SCHUYLER. 

4  Hun  (N.  Y.  Sup.  Ct.).  166.  — 1875. 

Learned,  P.  J. :  — 

Mrs.  Henriques,  in  her  lifetime,  made  two  notes  to  Dr.  Allen,  the 
plaintiff's  testator.  After  her  death  the  defendant  guaranteed  them, 
by  writing  under  each,  as  follows: 

For  value  received  I  hereby  guarantee  the  payment  of  the  above  note. 

L.  W.  Schuyler. 

On  the  trial  the  defendant  offered  to  prove  that  Dr.  Allen  was  the 
medical  attendant  of  Mrs.  Henriques;  was  in  the  habit  of  advising 
her  as  to  financial  and  other  matters;  that  she  reposed  confidence 
in  him  in  relation  to  her  affairs;  together  with  certain  other  matters 
tending  to  show  that  the  notes  were  obtained  by  fraud,  and  that 
they  were  without  consideration.  The  evidence  was  objected  to  on 
the  ground  that,  by  executing  the  guarantee,  the  defendant  had 
admitted  the  notes,  and  was  estopped;  that  the  defence  of  fraud 
was  personal  to  Mrs.  Henriques  and  her  representatives;  that  the 
defendant  could  not  impeach  the  settlement  between  maker  and 
payee.     The  evidence  was  excluded,  and  the  defendant  excepted. 

I  assume,  from  the  manner  in  which  the  case  is  presented,  that  it 
was  not  really  claimed  on  the  trial  that  these  matters  would  not  have 
been  competent  in  behalf  of  the  representatives  of  Mrs.  Henriques. 
Their  exclusion  was  on  the  ground  that  they  were  not  competent  in 

'  For  the  distinction  between  special  (non-assignable)  and  general  (assignable) 
guaranties,  see  Evansville  Nat.  Bank  v.  Kaiifinann,  93  N.  Y.  273;  Sazoye)-  v.  Hop- 
good,  13  N.  Y.  St.  Rep.  711.  —  Ed. 


VII.]  GUARANTOR.  495 

behalf  of  the  guarantor.  On  this  subject,  of  the  right  of  a  guarantor 
to  set  up  defences  which  would  undoubtedly  be  valid  in  favor  of  the 
principal,  there  is  an  apparent  conflict.  But  a  little  discrimination 
will  show  that  the  conflict  is  only  apparent. 

First.  There  is  a  class  of  cases  in  which  the  owner  of  a  note  or 
bond  has  assigned  it,  with  a  guaranty.  In  these,  it  has  been  held 
that  the  guarantor  could  not  show  that  the  instrument  was  invalid. 
It  would  be  unjust  to  permit  him  to  assign  an  invalid  instrument;  to 
guaranty  its  payment  or  collection;  to  receive  the  value,  and  then, 
when  sued  on  his  guaranty,  to  assert  that  the  original  instrument  was 
invalid.  He  is  estopped.  [Remsen  v.  Graves,  41  N.  Y.  475;  Zabriskie 
V.  C,  C.  and  C.  R  R.  Co.,  23  How.  [U.  S.J  399.)  The  case  of  Mann 
v.  Eckford' s  Executors  (15  Wend.  502),  is  of  this  character.  The  Life 
and  Fire  Company,  of  which  Eckford  was  president,  assigned  to  the 
Western  Insurance  Company  a  bond  and  mortgage.  Eckford 
guarantied  the  bond  and  mortgage,  and  the  money  paid  for  it, 
expressing  the  amount.  The  defendants,  his  executors,  were  not 
allowed  to  set  up  usury  in  the  bond  and  mortgage,  against  the  plain- 
tiff, the  receiver  of  the  Insurance  Company. 

Second.  The  guarantor  is  held  liable  in  those  cases  in  which  the 
debt  is  justly  owing,  although,  from  some  defect  or  incapacity,  the 
principal  in  not  liable  in  an  action.  Thus,  where  the  makers  of  a 
note  were  married  women,  incapable  (then)  of  making  a  note,  the 
accommodation  indorser  was  still  held  liable.  (Erioin  v.  Downs,  15 
N.  Y.  576;  see  Kimlmll  V.  JVeiueH,  7  Hill,  116.)  The  guarantor  of  a 
lease  is  liable,  although  only  one  of  the  two  lessees  executed  the  lease. 
(^McLaughlin  v.  McGovern,  34  Barb.  208.)  In  that  case,  Judge 
Bacon  speaks  of  this  class  of  cases,  mentioning,  among  others,  the 
guaranty  of  goods  sold  to  an  infant.  So  the  guarantor  of  a  note 
purporting  to  be  made  by  two,  where  the  signature  of  one  is  unauthor- 
ized, is  liable.  [Sterns  v.  Marks,  35  Barb.  565.)  In  all  these  cases 
the  debt  is  justly  owing  to  the  plaintiff;  and  through  no  fault  of  his, 
he  is  unable  to  recover  against  the  principal,  or  one  of  the  principals.* 

Third  A  guarantor  cannot  set  up,  by  way  of  set-off,  a  claim  dis- 
tinct from  that  on  which  he  is  sued.  The  right  of  set-off  (that  is, 
as  distinguished  from  a  defence  arising  upon  the  claim  itself)  belongs 
only  to  the   principal  debtor,   and   can  be  used   only  at  his  option. 

'  A  guarantor  is  not  discharged  merely  because  the  principal  has  a  good 
personal  defence,  as  coverture,  infancy  or  insanity.  Davis  v.  Siatts,  43  Ind. 
103;  Browning  V.  Carson,  163  Mass.  261;  Wiggins  Appeal,  100  Pa.  St.  155;  Lee 
V.  Yandell,  69  Tex.  34.  But  a  failure  of  consideration  in  such  a  case,  as 
between  the  principal  and  plaintiff,  discharges  the  surety.  Baker  v.  Kcnnett,  54 
Mo.  82.  —  Eu. 


496  LIABILITY   OF    PARTIES.  [ART.  VI. 

Such  is  the  doctrine  of  Gillespie  v.  Torrance  (25  N.  Y.  306),  and  this 
is  all  which  that  case  decides  on  this  point.  By  indirection,  however, 
it  implies  that  a  defence  to  the  claim  (as  distinguished  from  a  set-off'), 
is  available  to  the  guarantor.  To  the  same  effect  is  Lcivis  v. 
McMilkn  (41  Barb.  420). 

Fourth.  But  there  are  still  other  cases  which  are  not  embraced 
within  either  of  these  three  preceding  classes;  cases  where  the 
plaintiff  is  the  original  party  to  the  contract,  and  therefore  has  not 
i-eceived  it  by  assignment  from  the  guarantor;  where  the  proposed 
defence  is  not  the  incompetency  of  the  principal  to  contract; 
and  where  it  arises  out  of  the  contract  itself,  and  not  by  way  of 
set-off.  In  these  the  guarantor  has  been  permitted  to  make  the 
defence. 

He  has  thus,  as  to  the  original  contract,  been  allowed  to  set  up 
usury  i^Morse  v.  Jlovey,  9  Paige,  197;  Parshall  v.  Lamonrcaux,  37 
Barb.  1S9);  duress  of  his  principal  {Osborn  v.  Robbins,  36  N.  Y.  365; 
Strong  v.  Grannis,  26  Barb.  122);  partial  failure  of  consideration 
{Sawyer  v.  Chambers,  43  Barb.  622).  And  I  find  no  case  which 
intimates  that  when  a  person  has  obtained  an  obligation  from  a 
principal  by  fraud,  he  can  wipe  out  the  fraud  by  obtaining  a  surety 
to  the  obligation.  Assuming  that,  in  justice  and  equity,  the  obligee, 
by  reason  of  fraudulent  acts  on  his  part,  has  either  no  claim,  or  a  less 
claim,  against  the  principal,  I  see  no  reason  why  he  should  stand 
in  a  better  position  against  the  guarantor. 

The  distinction  which  has  been  pointed  out,  viz.,  that  inability  on 
the  part  of  the  principal  to  contract  is  no  defence  to  the  guarantor, 
while  fraud  in  the  contract  is,  may  be  found  in  the  civil  law.  This 
says  that  personal  defences  do  not  pass  to  others,  but  that  defences, 
inherent  in  the  thing,  such  as,  among  others,  fraud  and  duress,  are 
available  to  sureties.  {Dig.,  44,  i,  dc  exceptionibus,  c.  7,  §  i;  Cod. 
2,  24  [23]  de  fidejuss,  2.)  "  If,  in  the  principal  obligation,  there  is 
any  essential  vice  which  may  annul  it,  as  if  it  has  been  contracted  by 
force,  if  it  is  contrary  to  law,  or  to  good  manners,  if  it  be  founded 
only  on  a  fraud,  or  on  some  error  which  may  suffice  to  annul  it;  in 
all  these  cases  the  obligation  of  the  surety  is  likewise  annulled." 
{Strahatis  Doniat,  bk.  3,  tit.  4,  §  5,  art.  2;  id.,  bk.  3,  tit.  4,  §  i, 
art.  10.) 

The  defendant  offered  to  prove  acts  of  the  plaintiff's  testator, 
tending  to  show  that  he  obtained  the  notes  improperly  from  the 
maker;  that  he  took  advantage  of  her  confidence  in  him,  and  that 
she  did  not  owe  him.  If  these  facts  be  true,  he  ought  neither  to 
recover  of  her  representatives  on  the  notes,  nor  of  the  defendant  on 
her  guaranties. 


Yll.]  GUARANTOR.  497 

The  judgment  should  be  reversed,  and  a  new  trial  ordered,  costs 
to  abide  the  event. 

Present  —  Learned,  P.  J.,  Boardman  and  James,  JJ. 
Judgment  reversed,  and  new  trial  ordered,  costs  to  abide  the  event. - 

'  Accord:  Bryafit  v.  Crosby,  36  Me.  562  (fraud);  Swift  v.  Beers,  3  Denio  (N.  Y.) 
70  (illegality);  Griffith  \.  Sitgreaves,  <^  Pa.  St.  161  (duress).  For  an  enumera- 
tion of  the  circumstances  which  will  discharge  a  surety,  see  Neg.  Inst.  L.,  §  201 
[120].  —  Ed. 

negot.  instruments — 32. 


ARTICLE  VII. 

Duties   of    Holder:    Presentment  for  Payment. 
I.  Necessity  of  presentment. 

I.   Not  to  Charge  Acceptor  or  Maker. 

§  130  HARRISBURG  TRUST  CO.  v.  SHUFELDT,        [§  70] 

78  Federal  Reporter,  292.  —  1S97. 
\_Circuit  Court,  Dist.    Washington,  X.  Z>.] 

Hanford,  District  Judge. — This  is  an  action  to  recover  a 
balance  due  after  deducting  partial  payments  upon  a  negotiable 
promissory  note,  made  payable  on  demand.  The  defendant  has 
demurred  to  the  complaint,  his  contention  being  that  the  same  is 
insufficient,  for  failure  to  allege  a  demand  prior  to  the  commence- 
ment of  the  action.  There  is  a  rule  of  long  standing,  and  sup- 
ported by  the  weight  of  authority  in  this  country,  that  the  com- 
mencement of  an  action  is  itself  a  demand,'  and  that  failure  to 
request  payment,  prior  to  the  commencement  of  the  action,  affords 
no  ground  of  defence.  [Bank\.  Fox,  Fed.  Cas.  No.  2683;  5  Am. 
and  Eng.  Enc.  Law,  5285"   [2d  ed.  v.  4,  p.  35i-])- 

It  is  insisted,  however,  that  the  courts  and  the  text-books  in  this 
country  have  fallen  into  error  by  following  early  decisions,  which 
were  controlled  by  peculiar  facts,  and  which  are  insufficient  of  them- 
selves to  establish  a  general  rule  upon  the  subject.'  It  is  unwise  to 
depart  from  business  customs  and  practices  which  have  been  sanc- 
tioned by  repeated  decisions  of  courts,  and  acquiesced  in  for  a  con- 
siderable time,  and  which  may  fairly  be  supposed  to  have  been 
contemplated  by  the  parties  at  the  time  of  making  their  contract. 
This  contract  must  be  construed  as  one  having  been  made  subject 
to  the  rule  above  stated,  and  the  maker  of  the  note  is,  by  the  terms 


1  "  To  sav  that  the  suit  is  the  demand  is  to  repeat  an  unmeaning  phrase  as 
thus  used,  which  no  number  of  repetitions  can  make  sensible.  A  demand  note 
is  due  forthwith,  and  hence  can  be  sued  without  demand."  Wheeler  v.  War. 
ner,  47  N.  Y.  519.  holding  that  the  statute  of  limitations  begins  to  run  from  the 
date  of  the  note.  —  Ed. 

2  See  2  Ames'  Cases  on   Bills  and  Notes,  p.  61,  note  2.  —  Ed. 

[49S] 


I.]  NECESSITY   OF   PRESENTMENT.  499 

of  his  contract,  liable  without  any  demand,  prior  to  the  commence- 
ment of  an  action. 

Demurrer  overruled/ 


§  130  MONTGOMERY  v.  ELLIOTT.  [§  70] 

6  Alabama,  701.  —  1S44. 

This  action  was  commenced  before  a  justice  of  the  peace,  by  the 
defendant  in  error,  on  two  notes,  for  twenty  dollars  each,  in  the 
following  form: 

The  Real  Estate  Bank,  No.  52,  of  Caledonia,  Mississippi,  promise  to  pay  John 

Elliott,  or  bearer,  twenty  dollars,  on  demand,  at  their  banking  house,  Caledonia, 

Mississippi.  —  May  8.  1S38. 

^^  W.  G.  Wright,  Pn- si  dent. 

R.  DowDLE,  Cashier. 

Judgment  being  rendered  for  the  defendant,  the  plaintiff  appealed 
to  the  circuit  court,  where  judgment  was  rendered  for  the  plaintiff. 

The  defendant  moved  the  court  to  charge,  that  the  plaintiff,  to 
entitle  himself  to  a  recovery,  must  prove  a  demand  at  the  banking 
house  of  the  company  —  which  the  court  refused,  and  he  excepted. 

The  assignments  of  error  present  for  revision  the  rejection  of 
the  testimony  and  the  charge  of  the  court. 

Ormond,    J. The    question,   whetlier  a  demand  was  necessary 

before  suit,  is  one  of  considerable  difficulty.  Upon  this  subject,  a 
great  contrariety  of  opinion  formerly  prevailed  in  England,  as  to  the 
necessity  of  averring  and  proving  a  demand  as  a  precedent  condition 
to  the  right  to  recover,  when  the  instrument  was  made  payable  on 
its  face  at  a  particular  time  and  place,  or  where  it  was  accepted, 
payable  at  a  particular  place,  which  was  finally  settled  on  appeal  to 
the  House  of  Lords,  that  such  demand  was  necessary  in  the  case 
of  Roiue  V.   Young  (2  Brod.  &  Bing.  180).^ 


'  But  a  certificate  of  deposit  is  not  due  until  demand  is  made  and  the  certifi- 
cate returned  or  tendered.  Sliiite  v.  Pacific  Nat.  Bank,  136  Mass.  487;  Smiley  v. 
Fry,  100  N.  Y.  262;  McGoiigh  v.  Jamison,  107  Pa.  St.  336.  Contra:  Cur  ran  v. 
Witter,  68  Wis.  16;  Lynch  v.  Goldsmith,  64  Ga.  42;  Hunt  v.  Divine,  37  111.  137; 
Tripp  V.  Curtenius,  36  Mich.  494.  There  is  also  a  conflict  as  to  whether  bank 
notes  must  be  presented  for  payment  before  suit  brought.  3  Am.  &  Eng.  Enc. 
Law  (2d  ed.)  p.  778-  —  Ed. 

2  This  was  changed  by  Onslow's  Act  (i  &  2  Geo.  IV.,  c.  78)  which,  as  con- 
strued, renders  presentment  unnecessary  to  charge  the  acceptor  of  a  bill,  drawn 


500  PRESENTMENT   FOR   PAYMENT.  [ART.  VII 

In  the  United  States  a  different  doctrine  has  generally  prevailed, 
it  being  considered  matter  of  defence,  and  therefore,  not  necessary 
to  be  proved  by  the  plaintiff.  {IVallace  v.  McConncll^  13  Peters,  133. 
See,  also,  Chitty  on  Bills  [9  Am.  ed.]  393,  and  Story  on  Bills,  416; 
and  note,  where  the  cases  are  collected.) 

In  this  State,  it  has  always  been  considered  matter  of  defence, 
when  the  suit  is  against  the  maker  or  acceptor.  The  doctrine  is  so 
stated  by  Judge  Saffold,  in  Irvine  v.  Withers  (i  Stew.  234);  and 
although  it  was  not  acquiesced  in  by  the  whole  bench,  it  has  been 
considered  and  acted  on  as  settling  the  law  from  that  time  to  the 
present.      (Roberts  v.  Mason,  i  Ala.  Rep.  373.) 

The  question  in  this  case  is,  whether  the  same  rule  is  to  be  applied 
where  the  note  is  payable  on  demand  3.1  a  particular  place.  We  are 
unable  to  perceive  any  substantial  difference  between  the  two  cases. 
The  same  reasons  which  lead  to  the  conclusion  that  it  is  a  matter 
of  defence  when  the  note  is  payable  at  a  specified  time,  at  a  particu- 
lar place,  apply  with  the  same  force  when  it  is  payable  on  demand. 
In  either  case  it  is  impossible  that  the  defendant  can  be  prejudiced, 
as  he  can  always  defend  himself  by  proving  that  he  was  ready  at 
the  place  appointed  to  pay  the  debt,  and  if  not  ready  to  pay,  why 
should  the  plaintiff  be  required  to  do  an  unnecessary  act.  This 
question  is  considered  at  some  length  in  the  case  of  Huxtiire  v. 
Bishop  (3  Wend.  13),  and  the  law  considered  to  be  as  here  stated. 
The  rule  would  be  different  where  the  suit  is  against  an  indorser, 
his  contract  being  conditional  to  pay,  if  the  maker  does  not  on 
demand;  a  demand  and  notice  is,  therefore,  necesssary  by  the  terms 
of  his  contract    to  fix  his  liability. 

It  results  from  the  view  here  taken,  that  there  is  no  error  in  the 
judgment  of  the  Circuit  Court,  and  it  is  therefore  affirmed.' 

payable  at  a  particular  place  and  accepted  generally,  or  drawn  generally  and 
accepted  payable  at  a  particular  place;  though  not  if  accepted  payable  at  a  par- 
ticular place  only.  Selby  v.  Edeti,  3  Bing.  61  r.  See  Bills  of  Exchange  Act, 
§  52,  and  Neg.  Inst.  L.,  §  228  [140].  The  same  rule  applies  to  a  promissory 
note.  See  Bills  of  Exchange  Act,  §  87,  subsec.  (i);  Price  v.  Mitchell,  4  Camp. 
200;  Exon  V.  Russell,  4  M.  &  S.  507.  —  Ed. 

'See  for  a  full  discussion  of  the  authorities,  Montgomery  \.  Tutt,  11  Calif. 
307.  The  American  cases  have  almost  uniformly  held  that  presentment  of  a  bill  or 
note  payable  at  a  particular  place  is  unnecessary  in  order  to  maintain  an  action 
against  the  acceptor  or  maker;  an  omission  to  do  so  merely  stops  interest  and 
damages  in  case  the  acceptor  or  maker  was  ready  at  the  time  and  place  to  pay. 
Hills  V.  Place,  48  N.  Y.  520;  Cox  v.  yafional  Bank,  100  U.  S.  704,  713;  Eldred  v. 
Hawes,  4  Conn.  465;   Carley  v.   Vance,  17  Mass.  389.  —  Ed. 


11.  I.]  BY   WHOM    MADE.  5OI 

§  130      CONTINENTAL  NATIONAL  BANK  v.  TOWN-     [§  70] 

SEND. 

87  New  York,  S.  —  1S81. 
[Jic'p07-tcd  herein  at  p.  387.]' 


2.   Presentment  Necessary  to  Charge  Drawer    or  Indorser. 
§  130  LONG   V.    STEPHENSON.  [§  70] 

72  North  Carolina,  569.  —  1S75. 
[Repeated  herein  at  p.  474.]  ^ 


IL  What  constitutes  suffleient  ppesentment« 

I.   By  Holder  or  Authorized  Representative 
§  132  SUSSEX  BANK  v.   BALDWIN.  [§  72] 

17  New  Jersey  Law  [2  Harrison],  487,  —  1840. 

Dayton,  J. — This  case  was  tried  at  the  Sussex  Circuit  of  May, 
A.  D.  1838,  and  verdict  had  for  the  plaintiff.  Sundry  reasons  are 
now  relied  upon  to  set  the  same  aside,  and  I  will  consider  them  in 
their  order. 

The  defendants  are  the  indorsers  of  a  promissory  note  made  by 
Conrad  Teese,  Oct.  24,  1836,  for  five  hundred  and  five  dollars  and 
sixty-one  cents,  payable  six  months  after  date  to  the  order  of  Wm. 
A.  Baldwin  &  Co.  (the  defendants),  and  by  them  indorsed  to  the 
plaintiff.  The  first  reason  assigned  is,  that  the  note  was  not  duly 
presented  to  the  maker  for  payment.  That  it  was  presented  at  an 
improper  place,  to  wit,  the  office  of  Teese,  the  maker,  and  by  an 
improper  person,  to  wit,  one  Dennis,  who  swears  that  he  acted  as  the 
clerk  and  under  the  directions  of  Wm.  Tuttle,  who  was  himself 
merely  the  agent  of  James  Hedden,  the  notary  public. 

'  An  action  on  the  last  day  of  maturity  after  banking  hours,  brought  upon  a 

note  payable  at  bank,  or  after  demand  and  refusal,  is  premature.     Sutcliffe  v. 

Humphreys,  58  N.  J.  L.  42;   Farmers'  Nat.  Bk.  v.  Salina  Paper  Mfg.  Co.,        Kans. 

.  48   Pac.  863;    IViesinger  v.  Bank,    106   Mich.  291,  64   N.  W.    59;   Kennedy  v, 

Thomas,  1894,  2  Q.  B.  Div.  759. 

Contra:  Veazie  Bank  v.  Winn,  40  Me.  62;  Staples  v.  Franklin  Bank,  1  Met, 
(Mass.)  43.  —  Ed. 

«  See  §^  143-144  [S3-S4].  —  Ed. 


502  PRESENTMENT   FOR   PAYMENT.  [ART.    VII. 

As  to  the  place  of  presentment,'  the  objection  may  be  disposed  of 
very  briefly.  It  is  a  point  not  properly  arising  under  the  evidence 
in  the  case.  Dennis,  the  witness,  swears  that  Teese,  the  maker  of 
the  note,  told  him,  Dennis,  to  present  his  notes  for  payment  at  that 
place,  and  that  he  had  been  in  the  habit  of  doing  so.  This  estops 
Teese  from  objecting  to  the  place  of  presentment;  and  that  which 
is  good  against  the  drawer,  is  good  against  the  indorser.  {^State 
Bankx.  HiirJ,  12  Mass.  172;  WJiihvcIl  \ .  Johnson,  17  Mass.  R.  449.) 
But  it  is  thought  advisable  that  this  point  be  put  at  rest  in  this  State, 
by  an  expression  of  opinion  by  this  court. 

It  appears  by  the  evidence  that  the  office  in  question  was  the 
regular  place  of  business  of  the  maker;  and  I  have  no  doubt  where  a 
person  has  an  office  or  a  known  and  settled  place  of  business  for  the 
transaction  of  his  moneyed  concerns — whether  he  be  a  banker,  broker^ 
merchant,  manufacturer,  mechanic,  or  dealer  in  any  other  way,  a 
presentment  and  demand  at  that  place,  (as  well  as  a  presentment  and 
demand  at  his  residence),  is  good  in  law.  It  must  not,  however, 
be  a  place  selected  and  used  temporarily  for  the  transaction  of  some 
particular  business,  as  settling  up  some  old  books  or  accounts 
merely,  but  his  regular  and  known  place  of  business  for  the  trans- 
action of  his  moneyed  concerns.  The  counting  room  of  a  banker  or 
merchant  may  be  a  proper  place  for  a  demand,  though  the  manu- 
factory or  workshop  would  not.  Yet  if  the  manufacturer  or  mechanic 
have  an  office,  or  known  place  of  business  for  the  purpose  aforesaid, 
a  good  demand  may  be  made  there.  {Bank  of  Colu7nbia  v.  Lawrence^ 
I  Peters,  582;  Williams  m.  The  Bank  of  United  States,  2  Peters,  100; 
Byles  on  Bills,  118;  State  Bank  w  Hiinl,  12  Mass.  173.) 

Nor  is  there  anything  in  the  objection  that  the  presentment  was 
made  by  an  improper  person.  It  appears  by  the  evidence  that  Tuttle 
did  the  business  of  Hedden,  the  notary  public,  and  it  must  have  been 
with  the  consent  and  knowledge  of  the  bank  that  he  employed  and 
directed  Dennis,  who  w^as  his  clerk,  to  present  the  note  in  question 
to  the  drawers,  and  put  him  in  possession  of  the  note  for  that  pur- 
pose. If  the  note  had  been  paid  on  presentment,  he  could  and  would 
have  delivered  it  up  to  the  drawers,  and  that  would  have  exonerated 
them  from  further  liability.  An  authority  to  make  a  demand,  may 
be  created  by  parol,  and  the  mere  possession  of  the  paper,  is  evi- 
dence enough  of  such  authority.  (3  Kent.  C.  108;  Bank  of  Utiea  v. 
Smith,  18  J.  R.  230;  Shea  \.  Brett,  i  Pick.  401;  Morris  x.  Foreman, 
I  Dal.  193;  Freeman  and  others  X.  Boynton,  7  Mass.  487.) 

There  is  an  impression  current  in  some  degree,  even  with  the  bar, 
that  a  presentment  of  a  note  must  be  by  a  notary,  or  at  least  on  his 

'See  g  133  [73].  —  Ed. 


II,  I.]  BY   WHOM    MADE.  S^S 

behalf,  and  that  he  must  protest  it  upon  non-payment,  before  the 
indorser  is  liable.  But  this  is  not  so.'  The  record  of  a  demand 
and  notice,  etc.,  by  a  notary,  entered  in  his  book,  according  to  our 
statute,  of  2ist  February,  1829,  Harr.  C.  249,  may  serve  to  refresh 
his  memory,  or  in  case  of  his  absence  or  death  it  may  be  used  as 
evidence  of  the  facts  contained  in  it;  but  such  demand  and  protest 
by  a  notary  are  not  essential  to  a  recovery  against  the  indorser.  It 
was  not  so  by  the  common  or  commercial  law,  nor  is  it  required  by 
our  statute.  If  a  notary  act  in  the  premises,  and  make  the  protest, 
although  sanctioned  by  general  custom,  it  is  not  strictly  an  official 
act.  {Nichols  v.  Webb,  S  Wheat.  326;  3  Kent  C.  93-4;  i  Saund.  on 
PI.  &  Ev.  295.) 

Any  person  may  present  at  its  maturity,  a  promissory  note  of 
which  he  is  put  m  possession,  and  if  paid  in  the  ordinary  course  of 
business,  and  taken  up,  the  payment  is  good;  and  if  not  paid,  the 
demand  is  good  as  a  ground  work  for  notice  to  the  indorsers,  and 
that  without  any  protest.'  The  rule  is  otherwise  as  to  foreign  bills 
of  exchange,  which  must  be  protested  by  a  notary,  and  their  official 
seal  is  plenary  evidence  in  all  foreign  courts  and  countries,  of  the 
dishonor  of  the  bill  {I'ide  cases  above  cited). 

2.  The  next  objection,  is  to  the  notice  to  the  indorsers.'  The 
name  of  James  Hedden,  the  notary  public,  vf3.s printed  3.X.  the  foot  of 
the  notice,  not  written;  and  this  is  assigned  for  error.  There  is 
nothing  in  this  objection.  The  law  prescribes  no  form  of  notice, 
its  object  is  merely  to  appraise  the  party  of  the  non-payment  —  to 
put  him  upon  inquiry,  that  he  may  protect  his  rights.  This  is  as  well 
done  by  a  notice  with  a  printed  as  with  a  written  name. 

The  signature  of  the  notary  would  carry  with  it  in  a  large  majority 
of  cases  no  higher  degree  of  certainty  than  the  printed  name;  for 
it  must  in  most  cases  be  unknown  to  those  to  whom  notices  are  sent. 
The  notice  in  this  case  came  from  a  proper  source,  and  stated  the 
proper  facts;  that  is  enough.  It  is  needless  to  cite  authorities  upon 
this  point. 

[The  learned  judge  then  decides  that  the  notice  was  sent  in  due 
time,  and   that  there   was  no   usury.      Nevins,  J.,  dissented  on  the 

lasf  point.] 

Rule  made  absolute.' 


»See§  189  [118].  — En 

2  Baer  v.  Lcppcrt,  12  Hun  (N.  Y.)  516.  —  Ed. 

3  See  I  166  [95].  —  En. 

■•  The  drawer  may  provide  in  the  instrument  that  it  shall  not  be  presented  by 
a  specified  person.     Com.  Nat.  Bk.  v.  First  Nat.  Bk.,  118  N.  C.  783.  —  Ed- 


504  PRESENTMENT   FOR    PAYMENT.  [ART.  VII. 

2,  At  the  Proper  Time. 
§  131  JOHNSON  V.   HAIGHT.  [§  71] 

13  Johnson  (N.  Y.),  470.  —  1816. 
Action  by  holder  against  indorsers. 

Spencer,  J.,  delivered  the  opinion  of  the  court. 

On  the  second  point,  the  defendants  are  entitled  to  judgment. 
The  third  day  of  grace  fell  on  the  29th  day  of  November,  and  pay- 
ment was  not  demanded  of  the  maker  until  the  30th.  The  law  is 
perfectly  settled,  that  a  note  must  be  demanded  on  the  third  day  of 
grace,  unless  that  falls  on  Sunday,  and  then  it  must  be  demanded  on 
the  second  day  of  grace.  (2  Gaines,  343;  16  East,  250.)  Here 
there  is  no  excuse  for  delaying  the  demand  on  the  maker,  and  there 
is  a  palpable  want  of  due  diligence,  which   discharges  the   indorser. 

Judgment  for  the  defendant.' 


§  131  TURNER  V.  IRON  CHIEF  MINING  CO.  [§  71] 

74  Wisconsin,  355.  — ■  18S9. 

Action  by  holder  against  indorser  of  a  note  payable  on  demand 
■with  interest.  The  note  was  dated  January  10,  was  transferred  by 
defendant's  indorsement  on  February  15,  was  presented  to  maker 
for  payment  on  December  16,  was  dishonored  and  notice  given  to 
defendant.  The  court  directed  a  verdict  for  defendant.  Plaintiff 
appeals. 

Cassoday,  J.  —  From  the  undisputed  evidence  it  appears  that  the 
demand  of  payment  and  notice  of  protest  were  made  and  given  more 

'  See  Hart  v.  Smith,  15  Ala.  807,  ante,  p.  234.  See  §  145  [85],  which  abolishes 
days  of  grace.  Paper  payable  without  grace  falling  due  on  a  legal  holiday  is 
payable  on  the  next  succeeding  business  day.  Salter  v.  Burt,  20  Wend.  (N.  Y.) 
205. 

See  ^  146  [86].  Days  are  reckoned  exclusive  of  the  day  of  date;  exclusive  of 
the  day  of  sight;  and,  where  grace  is  allowed,  exclusive  of  the  nominal  day  of 
payment.  Animidown  v.  Woodman,  31  Me.  5S0;  Rochncr  v.  Knickerbocker  Co., 
infra. 

Months  in  bills  and  notes  are  reckoned  as  calendar  months  according  to  the 
portion  of  the  calendar  covered  by  the  instrument.  Thus,  a  note  dated  January 
30,  due  one  month  from  date,  without  grace,  is  due  on  February  28,  except  in 
leap-year,  when  it  is  due  on  February  29.  A  similar  note  dated  February  28  is 
due  on  March  28.  Wagner  v.  Kenner,  2  Rob.  (La.)  120;  Roehner  v.  Ktiicker- 
backer  Co.,  63  N.  Y.  160.  —  Ed. 


II.  2.]  AT   \YHAT   TIME.  505 

than  ten  months  after  the  transfer  and  indorsement  of  the  note. 
The  law  is  well  settled  that  a  promissory  note  payable  on  demand, 
whether  with  or  without  interest,  is  due  forthwith,  and  an  action 
thereon  against  the  maker  is  barred  by  the  statute  of  limitations,  if 
not  brought  within  the  time  prescribed  by  statute  after  its  date. 
(JVheeler  \.  Warner,  47  N.  Y.  519;  Holland  y.  Edmonds,  24  N.  Y. 
307;  Birrnhani  v.  Allen,  r  Gray,  496;  Sylvester  v.  Crapo,  15  Pick. 
92;  Taylor's  Adm' rs  v.  Witnian  s  Advi  rs,  3  Grant's  Gas.  138;  Larason 
V.  Lambert,  12  N.  J.  Law,  247;  Curran  v.  IVitter,  68  Wis.  16,  60  Am. 
Rep.  827;  Schriber  v.  Richmond,  73  Wis.  12;  Mitchell  v.  Easton,  37 
Minn.  335;  Hill  v.  Henry,  17  Ohio,  9;  Caldwell  \.  Rodman,  5  Jones' 
Law,  139;  IVilks  V.  Robinson,  3  Rich.  Law,  182.)  The  mere  fact 
that  such  note  is  payable  at  a  particular  place  does  not  even  make  it 
necessary  to  allege  or  prove  that  it  was  so  presented  before  the  com- 
mencement of  the  action.      (^Dougherty  \ .  Western  Bank,  13  Ga.  287.) 

This  being  so,  it  necessarily  follows  that  the  note  in  question 
became  due  and  payable  immediately  upon  its  inception,  and  that 
upon  its  transfer  and  indorsement  Moore,  Benjamin  &  Co.  might 
immediately  have  maintained  an  action  thereon  against  the  maker 
corporation,  without  any  demand  whatever. 

Two  questions  are  thus  suggesed:  Was  it  necessary  for  that  firm 
to  demand  payment  and  give  notice  of  non-payment  in  order  to 
charge  Henry  M.  Benjamin  as  indorser  thereon?  And,  if  so,  was  he 
discharged  by  the  delay  in  making  such  demand  and  giving  such 
notice? 

It  has  been  held  in  New  York,  and  perhaps  elsewhere,  that  an 
"  indorsed  promissory  note,  payable  on  demand  with  interest,  is  a 
continuing  security,  on  which  the  indorser  will  remain  liable  until 
an  actual  demand,  and  upon  which  the  holder  is  not  chargeable  with 
neglect  for  omitting  to  make  demand  within  any  particular  time." 
QMerrittw  Todd,  23  N.  Y.  28,  80  Am.  Dec.  243.)  But  much  of  the 
reasoning  in  that  case  seems  to  have  been  disapproved  by  subse- 
quent cases  in  the  same  court.  (Jlerrick  v.  Woolverton,  41  N.  Y. 
581;  Wheeler  v.  Warner,  47  N.  Y.  519;  Pardee  \.  Fish^  60  N.  Y.  266; 
Crini  v.  Starkweather,  88  N.  Y.  339;  Parker  v.  Stroud,  98  N.  Y.  379; 
Shutts  v.  Fingar,  100  N.  Y.  541.)  The  case  oi Merrittx.  Todd{2T,  N.  Y. 
28)  has  been  expressly  repudiated  in  Louisiana,  where  it  is  held  that 
"  a  demand  note  must  be  protested  and  notice  given  within  a 
reasonable  time  to  hold  an  indorser;  and  the  fact  that  the  indorse- 
ment was  for  accommodation,  and  that  the  note  bears  interest, 
makes  no  difference."  [Thielman  v.  Giieblc,  32  La.  Ann.  260;  36 
Am.  Rep.  267.)  This  ruling  seems  to  be  in  harmony  with  the  cur- 
rent of  authority  in  this  country,  as  appears  from  the  valuable  notes 


506  PRESENTMENT   FOR   PAYMENT.  [ART.  VII. 

by  Mr.  Freeman  in  80  Am.  Dec.  250-254.  Among  the  cases  support- 
ing this  view  may  be  cited:  Furman  v.  Haskin,  2  Caines,  372;  Sice 
V.  Cunninghaf?i,  i  Cow.  397;  Field  v.  Nickerson,  13  Mass.  131;  Seaver 
V.  Lincol)!^  21  Pick.  267. 

The  ordinary  contract  of  an  indorser  of  a  note  is  to  pay  the  same, 
if  the  maimer  does  not,  on  presentation  at  maturity,  in  case  he  is 
duly  notified.  {Charles  v.  Denis,  42  Wis.  57;  Sumner  v.  Bowen,  2 
Wis.  524;   Catlin  v.  yones,  i  Pin.  130.) 

The  only  difference  between  such  a  case  and  the  case  at  bar  is 
that  here  the  note  was  due  before  the  indorsement  was  made.  It  is 
substantially  the  same  as  a  note  payable  at  a  fixed  time,  and  then 
indorsed  by  the  payee  after  maturity.  The  rule  seems  to  be  firmly 
established  that,  in  order  to  charge  such  an  indorser  after  maturity 
with  liability,  payment  must  be  demanded  of  the  maker  within  a 
reasonable  time  thereafter,  and,  in  case  of  failure  to  pay,  notice 
thereof  must  thereupon  be  given  to  the  indorser.  {Berry  v.  Robin- 
son, 9  Johns.  121,  6  Am.  Dec.  267;  Poole  v.  Tolleson,  10  Am.  Dec. 
663;  Ecfert  v.  Des  Coudres,  12  Am.  Dec.  609;  Nash  v.  Harrifigton, 
2  Aikens,  9,  16  Am.  Dec.  672;  Colt  v.  Barnard,  18  Pick.  260,  29  Am. 
Dec.  584;  Kirkpatrickx.  McCullough,  39  Am.  Dec.  158;  Gray  v.  Bell, 
44  Am.  Dec.  277;  Leavitt  \.  Futna?n,  3  N.  Y.  494,  53  Am.  Dec.  322; 
Mudd  \.  Harper,  54  Am.  Dec.  644;  Bassenhorst  v.  Wilby,  45  Ohio  St. 
333.)  This  court  has  frequently  sanctioned  this  doctrine.  {Corwith 
V.  Morrison,  i  Pin.  489;  Lindsey  v.  McClelland,  18  Wis.  481;  Gunn 
V.  Madigan,  28  Wis.  164.) 

The  cases  cited  also  firmly  establish  the  rule  that  where,  as  here, 
the  material  facts  are  admitted  or  not  in  dispute,  the  question  as  to 
what  constitutes  a  reasonable  time  for  making  such  demand  and 
giving  such  notice  is  one  of  law  for  the  court.  We  are  all  clearly  of 
the  opinion  that  the  delay  in  making  the  demand  and  giving  the 
notice  in  the  case  at  bar  was  unreasonable,  and  hence  that  the  court 
properly  directed  a  verdict  in  favor  of  the  defendant,  Henry  M. 
Benjamin. 

Bv  the  Court. — The  judgment  of  the  Circuit  Court  is  affirmed.' 


'Accord:  Leonard  v.  Olson,  (Iowa,  1S96)  68  N.  W.  Rep.  677,  where  although 
demand  was  excused  because  of  the  absence  of  the  maker  from  the  state,  notice 
to  the  indorser  within  a  reasonable  time  was  not  excused.  —  Ed. 


n.  2.]  AT   WHAT   TIME.  507 

§  131  PARKER  V.   REDDICK.  [§  71] 

65  Mississippi,  242.  —  1S87. 

On  Sept.  22,   1884,  W.   J.   Parker  bought  from  Snider  &  Son  an 
instrument  as  follows:  — 

Baxkixg  House  of  M.  C.  Snider  &  Son,  Grenada. 
$200.00  Grenada,  Miss.,  Sc-pt.  22,  1SS4. 

Pay  to  the  order  of  W.  J.  Parker,  two  hundred  dollars. 

J.  B.  Snider,  Cashier. 
To  Latham,  Alexander  &:  Co.,  New  York.  N.  Y. 
No.  50,665. 

On  the  same  day  Parker  indorsed  this  instrument  and  forwarded 
it  to  F.  jV[.  Lamon,  Brooksville,  Florida.  On  October  i,  1SS4, 
Lamon  indorsed  it  to  J.  M.  Reddick.  On  Oct.  3,  1884,  Reddick 
indorsed  it  to  A.  X.  Chelf.  On  Oct.  13,  1884,  Chelf  indorsed  it  to 
Hancock  &  Edrington,  who  indorsed  it  to  Witz,  Biddle  &  Co.,  who 
indorsed  it  t(^  the  Union  Bank  of  Baltimore,  who  indorsed  it  to  the 
"  Republic  "  Bank  of  New  York,  who,  on  Oct.  21,  1884,  presented 
the  same  for  payment,  which  was  refused  on  the  gound  that  Snider 
&  Son  had  no  funds  in  the  hands  of  the  drawees.  The  instrument 
was  duly  protested,  and  notice  was  forwarded  to  the  indorser  Parker, 
at  Grenada,  Miss.,  and  also  to  the  other  several  indorsers.  All  the 
indorsers  of  the  paper  in  question  resided  in  the  town  of  Brooksville, 
Florida,  except  Witz,  Biddle  &  Co.,  and  the  two  banks  referred  to; 
and  it  was  held  in  that  town  until  the  indorsement  to  Witz,  Biddle 
&  Co.,  who  resided  in  Baltimore,  Md.  There  were  daily  mails  from 
Brooksville  by  which  a  letter  could  reach  New  York  in  five  days. 

J.  M.  Reddick,  one  of  the  indorsers,  as  well  as  an  indorsee,  after 
having  paid  the  amount  of  the  check  or  bill  of  exchange  to  his 
indorsee,  brought  this  action  against  J.  B.  Snider,  surviving  partner 
of  Snider  &  Son,  and  \\ .  J.  Parker,  to  recover  the  value  of  said 
instrument. 

On  the  first  trial  the  jury  found  for  the  defendants.  This  verdict 
was  set  aside  by  the  Court.  On  the  second  trial  the  jury  found  for 
the  plaintiff.  The  defendant,  Parker,  appealed  from  the  judgment 
of  the  court. 

Arnold,  J.,  delivered  the  opinion  of  the  court. 

It  is  uncertain  from  the  evidence  whether  the  drawees  of  the 
instrument  upon  which  appellants  were  sued  were  bankers  or  not; 
but  whether  the  paper  be  called  a  check  or  bill  of  exchange,  it 
expressed  no  time  for  payment,  and  was,  therefore,  payable  on 
demand.     A  bill  or  check,  payable  on  demand,  must  be  presented 


5o8  PRESENTMENT    FOR   PAYMENT.  [ART.  VII. 

for  payment  within  a  reasonable  time.  What  constitutes  reasonable 
time  in  such  case,  is  a  question  of  law  to  be  determined  by  the  court, 
when   the   facts   are   ascertained.     {^Baskerville  v.  Harris^    41    Miss. 

535-) 

No  delay  in  making  presentment  of  paper  payable  on  demand,  can 

be  termed  reasonable,  if  it  is  more  than  is  fairly  required,  in  the 

ordinary  course  of  business,   without  special  inconvenience   to  the 

holder,  or  by  the  special  circumstances  of  the  case.      {Phxnix  Iiis. 

Co.   V.  Gray,    13  Mich.  191.)     Such  paper    contemplates    immediate 

payment.      It    cannot  be    said    that    it    is  intended   for   circulation. 

One  who  holds  a  bill  or  check  payable  on  demand,  beyond  the  time 

necessary,  in  the  usual  course  of  business,  for  its  presentation  for 

payment,  does  so  at  his  peril.      The  general  rule,  derived  from  the 

authorities,  but  subject  to  modification  by  special  circumstances,  is, 

that  if  the  drawee  of  such  paper,  resides  in  a  different   place  from 

that  in  which  it  is  drawn,  and  the  instrument  must  be  sent  by  mail 

for  presentment,  it  must  be  mailed  on  the  day  next  after  that  on 

which  it  was  received  by  the  holder,     (i  Danl.  on  Neg.  Inst.,  §  605; 

2  Id.,   §§   1586,    1593;  Byles  on  Bills   [7th  Am.  ed.],  211,  212,    213; 

Chittv  on   Bills   [13th  Am.  ed.],  433;  Partner  v.  Parham,  2  S.  &  M. 

151.)' 

Paper  pavable  on  demand,  while  not  commonly  intended  for  that 
purpose,  may  be  put  into  circulation;  but  its  ultimate  presentment 
for  payment  cannot  be  delayed  beyond  a  reasonable  time,  by  transfer 
or  successive  transfers,  any  more  than  it  can  by  being  locked  up,  or 
held  an  unreasonable  time,  by  the  first  or  any  subsequent  holder. 
(Chitty  on  Bills  [13th  Am.  ed.],  430;  2  Daniel  on  Neg.  Insts.,  §  1595; 
Story  on  Prom.  Notes,  §  494.) 

If  the  paper  sued  on  be  regarded  as  a  bill,  the  drawer,  as  well  as 
the  indorsers,  would  be  discharged  by  the  negligence  and  delay  in 
respect  to  the  presentment;  but,  if  a  check,  indorsers  would  be  dis- 
charged by  such  laches,  while  the  drawer  would  not,  unless  he  could 
show  that  he  was  injured  by  the  default.  He  would  be  entitled  only 
to  such  presentment  and  notice  as  would  save  him  from  loss. 
(2  Daniel  on  Neg.  Insts.,  §  15S7.) 

No  excuse  is  shown  by  the  record  for  the  delay  which  intervened 
in  presenting  the  paper  in  question  for  payment,  and  the  loss  thereby 
occasioned  cannot  be  imposed  on  the  indorser,  Parker.  As  to  him, 
the  last  verdict  was  contrary  to  the  law  and  the  evidence.  The  court 
below  erred  in  instructing  the  jury  that  the  presentment  was  made 
within  a  reasonable  time,  and  in  refusing  to  instruct  the  jury  to  the 
contrary.  The  judgment  is  affirmed  as  to  the  drawer.  Snider,  who 
made  no  defence  below  and  assigns  no  error  here;  but  it  is  reversed 


II.  2.]  AT   WHAT    TIME.  509 

as  to  the  indorser,  Parker,  and  the  last  verdict  as  to  him  is  set 
aside,  and  the  first  verdict  as  to  him  is  restored,  and  judgment 
rendered  thereon,  here,  in  his  favor.' 


131  ROBINSON  V.   AMES.  [§  71J 

20  Johnson,  146.  —  1822. 
\Rep07-ied  herein  at  p.   633.] 


§  132  FARNSWORTH  :•.   ALLEN.  [§  72] 

4  Gray  (Mass.)  453.  —  1855. 

Action  by  holder  against  indorser.  Defence,  presentment  and 
demand  insufficient.  Verdict  for  plaintiff.  Defendant  alleges  ex- 
ceptions. 

The  agent  of  the  holder  did  not  know  the  maker's  place  of  resi- 
dence. After  inquiring  it,  he  gave  the  note  to  a  notary  who  went  to 
the  house  of  the  maker  and  arrived  there  about  nine  o'clock  in  the 
evening.  The  maker  and  his  family  had  retired  for  the  night,  but 
the  maker  answered  the  bell,  and,  upon  the  note  being  presented, 
refused  payment. 

BiGELOW,  J.  —  The  note  declared  on,  not  being  payable  at  a  bank, 
or  at  any  place  where  business  was  transacted  during  certain  stated 
hours  in  each  day,  was  properly  presented  to  the  maker  at  his  place 
of  residence.  It  was  also  the  duty  of  the  holder  to  present  it  within 
reasonable  hours  on  the  day  of  its  maturity.  No  fixed  rule  can  be 
established  by  which  to  determine  the  hour  beyond  which  a  present- 
ment, in  such  case,  will  be  unreasonable  and  insufficient  to  charge 
an  indorser.  Generally,  however,  it  should  be  made  at  such  hour 
that,  having  regard  to  the  habits  and  usages  of  the  community  where 
the  maker  resides,  he  may  be  reasonably  expected  to  be  in  a  con- 
dition to  attend   to  ordinary  business.     In  the  present  case,  taking 

'A  note  indorsed  when  overdue  must  be  presented  within  a  reasonable  time. 
Light  V.  Kingsbury,  50  Mo.  331,  ante,  p.  237. 

For  presentment  for  acceptance,  see  i^  24c  [144].  For  presentment  of  checks 
see  §  322  [186].  The  Negotiable  Instruments  Law  has  abolished  the  distinction 
between  bills  payable  on  demand  and  bills  payable  at  sight.     See  5i  26  [7]. 

See  on  reasonable  and  unreasonable  delay,  2  A.mes'  Cases  on  Bills  and  Notes, 
277,  note. 

For  effect  of  unreasonable  delay  upon  the  question  of  "  holder  in  due  course," 
see  §  92  [53];  ante,  pp.  396-397-  —  Et)- 


5IO  PRESENTMENT    FOR    PAYMENT.  [ART.  VH. 

into  consideration  the  distance  of  the  place  of  residence  of  the  maker 
from  Boston,  where  the  note  was  dated,  and  where  it  was  held  when 
it  became  due;  the  means  that  were  taken  to  ascertain  the  residence 
of  the  maker,  and  the  season  of  the  year  at  which  the  note  fell  due, 
we  are  of  opinion  that  a  presentment  at  nine  o'clock  in  the  evening 
was  seasonable  and  sufficient.  It  is  quite  immaterial  that  the  maker 
and  his  family  had  retired  for  the  night.  The  question  whether  a 
presentment  is  within  reasonable  time  cannot  be  made  to  depend  on 
the  private  and  peculiar  habits  of  the  maker  of  a  note,  not  known 
to  the  holder;  but  it  must  be  determined  by  a  consideration  of  the 
circumstances  which,  in  ordinary  cases,  would  render  it  seasonable 
or  otherwise.  {Barclay  v.  Bailey,  2  Campb.  527;  Triggs  \ .  Newn- 
/lani,  10  Moore,  249,  i  Car.  &  P.  631;  Wilkins  v.  Jadis,  2  B.  &  Ad. 
18S;   Cayuga  County  Batik  v.  Hunt,  2  Hill  [N.  Y.],  635.) 

Exceptions  overruled.' 


§  135    NEWARK  INDIA  RUBBER  MFG.  CO.  v.  BISHOP.  [§  75] 
3  E.  D.  Smith  (N.  Y.  City  C.  P.),  48.  —  1S54. 

Action  by  holder  against  two  indorsers.  Judgment  for  plaintiff. 
Defendants  move  for  a  new  trial,  which  is  granted  as  to  Grififith  but 
denied  as  to  Bishop.     Bishop  appeals. 

The  note  was  payable  at  the  Bowery  Bank.  On  the  day  of 
maturity  Bishop  left  his  check  with  the  teller  to  take  up  the  note. 
The  note  was  not  presented  during  banking  hours  and  at  the  close 
of  banking  hours  the  teller  left  the  bank  having  the  check  still  in  his 
custody.  After  banking  hours  the  note  was  presented  to  a  clerk 
who  was  at  the  bank  and  who  examined  the  ledger  and  said  there 
were  no  funds.      Due  notice  was  given. 

At  the  trial  the  jury  were  instructed  as  follows: 

"  If  funds  were  provided  and  set  apart  to  pay  the  note,  and  if  it 
was  not  paid  for  the  reason  that  the  note  was  not  presented  for 
payment  in  the  usual  business  hours  of  the  bank,  the  indorsers  are 
discharged. 

"  A  presentment  of  the  note  for  payment  at  the  bank,  but  not 
within  the  usual  business  hours,  to  a  clerk  who  could  not  pay  the 
note,  is  not  a  good  presentment  which  will  hold  the  indorser. 

"  It  is  not  enough  that  the  clerk  to  whom  at  such  a  time  the  pre- 
sentment is  made,  have  power  to  bind  the  bank  to  pay  the  note  by 
certifying  in  writing  on  the  note  that  it  is  good. 

'  Compare  Dana  v.  Sawyer,  22  Me.  244,  holding  the  hour  unreasonable.  —  Ed. 


II.    2.]  AT   WHAT   TIME.  511 

"  In  order  to  make  a  presentment  at  such  a  time,  a  sufficient  one, 
the  person  to  whom  it  is  made  must  have  the  power  to  pay  the  note 
and  to  take  it  up,  by  actual  payment  to  its  holder  of  funds  that  are 
provided  in  the  bank  for  that  purpose." 

Woodruff,  J.  —  I  did  not  feel  called  upon  to  order  a  new  trial  in 
this  case  in  favor  of  the  appellant  Bishop,  who  had  himself  with- 
drawn the  money  provided  to  meet  the  note.  He  knew  that  the 
maker  would  not  pay  the  note  as  early  as  the  morning  of  the  day  it 
became  due,  for  he  had  himself  undertaken  to  provide  funds  for  its 
payment.  On  learning  that  the  note  was  not  presented  till  after 
business  hours,  he  himself  takes  the  money  which  had  been  set  apart 
for  the  use  of  the  plaintiff,  and  appropriates  it.  Under  such  circum- 
stances, the  jury  having  rendered  a  verdict  against  him  on  the  trial, 
I  did  not  think,  and  I  do  not  now  think,  that  the  court  should  set 
that  verdict  aside  as  against  evidence  for  his  benefit,  and  to  enable 
him  to  keep  that  money,  when  he  has  not  been  in  any  manner  or  by 
any  possibility  injured  by  any  defect  in  the  presentment. 

The  case  of  the  defendant  Griffith  is  very  different.  It  is  an  undis- 
puted fact  that  if  the  note  had  been  presented  at  the  bank  within  the 
usual  business  hours  it  would  have  been  paid.  It  is  equally  clear 
that  at  the  time  the  note  w^as  presented,,  there  was  no  person  in  the 
bank  who  could  pay  it.  The  undertaking  which  the  note  and  its 
indorsements  imported  was,  that  there  should  be  at  the  bank  during 
the  usual  hours  of  business  on  that  day,  funds  in  the  hands  of  proper 
persons  competent  to  pay  them  over,  sufficient  and  ready  to  meet 
that  note.  Not  that  every  person  who  might  be  employed  about 
the  bank,  from  the  president  down  to  the  porter,  and  who  might 
happen  to  be  in  the  bank  after  it  was  closed,  should  at  all  hours,  so 
long  as  the  door  was  unlocked,  be  ready  to  pay  the  note. 

I  do  not  question  that  there  may  be  a  good  presentment  at  bank 
after  banking  hours,  by  which  I  mean  after  the  hour  until  which 
banks  are  open  for  the  purpose  of  paying  notes  which  may  be  pre- 
sented. But  I  think  that  he  who  delays  presentment  till  after  that 
hour  takes  the  risk  of  finding  at  the  bank  a  person  who  can  pay  the 
note  if  the  funds  are  provided,  or  who  is  authorized  to  refuse  if  they 
are  not. 

The  case  of  Garnett  v.  Woodcock  (i  Stark.  475),  which  has  been 
referred  to  in  support  of  the  sufficiency  of  this  presentment,  pro- 
ceeds upon  the  distinct  ground  that  if  a  banker  appoint  a  person  to 
attend  in  order  to  give  an  answer,  a  presentment  would  be  sufficient 
if  made  before  12  o'clock  at  night,  and  that  in  that  case  it  did  not 
appear  but  the  person  was  stationed  there  for  that  express  purpose; 
while  the  general   rule  that  presentment  must  be  made  within  the 


512  PRESENTMENT   FOR   PAYMENT.  [ART.  VII. 

usual  hours,  is  not  at  all  repudiated  but  rather  affirmed  by  that  same 
case.  (And  see  Farker  \.  Gordon^  7  East,  385;  Barclay  \.  Bailey,  2 
Camp.  527;  IVilkinsv.  ^adis,  2  B.  &  A.  18S;  Elford  v.  Teed,  i  M. 
&  S.  88;  Bank  of  Utica  v.  Smith,  18  J.  R.  230.) 

In  this  case  it  does  affirmatively  appear  that  the  person  to  whom 
the  presentment  was  made  was  not  stationed  there  to  give  an 
answer.  The  funds  were  there,  but  he  could  not  pay  the  note. 
Had  he  known  that  the  funds  were  there,  provided  for  the  express 
purpose,  still  he  could  not  pay  the  note,  so  that  it  was  by  reason  of 
the  omission  to  present  within  the  usual  hours,  and  for  that  cause 
alone,  that  the  note  was  not  paid  at  its  maturity.  I  think  that  the 
charge  was  in  this  respect  correct. 

[Ingraham,  p.  J.,  also  wrote  an  opinion  for  affirmance.] 
Daly,  J.,  concurred  in  affirming  the  order,  but  wrote  no  opinion. 

Order  affirmed  and  a  new  trial  denied.* 


3.  At  the  Proper  Place. 
§  133  BROOKS  V.   HIGBY.  [§  73] 

II  Hun  (N.  Y.  Supreme  Ct.)  235. —  1S77. 

Action  by  holder  against  indorsers.  The  bill  was  drawn  on  N.  F. 
Mills,  114  South  Main  St.,  St.  Louis,  and  by  him  accepted.  The 
notary's  certificate  stated  that  the  bill  was  presented  "  at  the  place 
of  business  of  N.  F.  Mills,  St.  Louis."  It  appeared  in  evidence  that 
Mills  had  two  places  of  business  in  St.  Louis.  Defendant  moved  for 
nonsuit,  which  was  denied.     Judgment  for  plaintiff. 

1  Approved  in  Salt  Springs  N'.  B.  v.  Burton,  58  N.  Y.  430,  436. 

If  the  bill  or  note  is  presented  at  a  business  office  or  a  bank,  it  must  be  pre- 
sented during  customary  business  hours.  Parker  v.  Gordon,  7  East  (K.  B.)  385. 
But  if  the  holder  finds  a  person  at  such  office  or  bank  after  business  hours  upon 
whom  demand  may  properly  be  made,  such  demand  is  good.  Garnett  v.  Wood- 
cock, 6  Maule  &  Selwyn  (K.  B.)  44;  Salt  Springs  Nat.  Bk.  v.  Burton,  58  N.  Y. 
430.  See  post,  §  135  [75].  A  notary's  certificate  need  not  name  the  time  of 
day  when  presentment  was  made,  for  it  will  be  presumed  to  be  a  reasonable 
hour.  Cayuga  County  Bk.  v.  Hunt,  1  Hill  (N.  Y.)  635.  But  where  the  notary's 
certificate  states  that  he  presented  the  instrument  at  the  office  of  the  maker  at 
5.20  p.  m.,  and  found  the  door  locked,  it  is  error  to  refuse  to  hear  evidence  that 
this  is  not  within  the  customary  business  hours.  Clouoh  v.  Holden,  115  Mo. 
336.  —  Ed. 


II.  3-]  AT  \VHAT    PLACE.  513 

Smith,  J.  — As  the  draft  was  addressed  to  the  drawee  at  a  par- 
ticular place  in  the  city  where  he  resided,  and  was  thus  accepted  by 
him,  the  particular  place  thus  designated  was  the  place  of  payment, 
and  a  due  presentment  and  demand  of  payment  at  that  place  was 
necessary  in  order  to  charge  the  indorsers.  (Story  on  Prom.  Notes, 
§  227  and  note  3,  and  cases  there  cited.)  The  certificate  of  the 
notary  stated  merely  that  the  draft  was  presented  and  payment 
demanded  "  at  the  place  of  business  "  of  the  acceptor,  without 
specifying  the  place.  As  it  appeared  that  the  acceptor  had  two 
places  of  business  in  St.  Louis,  the  certificate  furnished  no  evidence 
whatever  that  the  presentment  and  demand  were  at  the  place  where 
the  draft  was  payable.  The  proof  was  fatally  defective,  and  the 
motion  for  a  nonsuit  should  have  been  granted. 

The  respondent's  counsel  proposed  to  supply  the  defect  on  the 
argument  at  banc  by  the  production  of  a  fresh  certificate  of  the 
notary  showing  that  the  draft  was  presented  at  No.  114  South  Main 
street.  The  rule  allowing  evidence  of  a  fact  imperfectly  proved  at 
the  trial  to  be  exhibited  at  bar,  in  opposition  to  a  motion  for  a  new 
trial,  is,  in  general,  confined  to  records  or  documentary  evidence 
which  proves  itself,  and  on  which  no  question  can  arise  in  the  cause, 
except  such  as  is  apparent  on  its  face.  {Bank  of  Charleston  v. 
Enien'ch,  2  Sandf.  718;  Dresser  v.  Brooks,  3  Barb.  429;  Burt  v. 
Place,  4  Wend.  591;  Armstrong  v.  Percy,  5  id.  535;  Ritchie  v.  Put- 
na/n,  13  id.  524;  Hugh  v.  Wilson,  2  Johns.  46.)  Under  the  statute 
of  1833,  a  notarial  certificate  is  but  presumptive  evidence,  and  may 
be  explained  or  contradicted  by  the  party  against  whom  it  is  pro- 
duced. The  new  certificate  offered  in  this  case  cannot  be  received 
at  bar  to  conclude  the  defendants;  if  it  is  to  be  used  against  them 
they  are  entitled  to  an  opportunity  to  meet  it  at  the  trial. 

We  are  also  of  opinion  that  the  evidence  required  the  submission 
of  the  question  of  usury  to  the  jury. 

Judgment  and  order  should  be  reversed  and  new  trial  ordered, 
costs  to  abide  event. 

Present — Mullin,  P.  J.,  Talcott  and  SxMITH,  JJ. 

Judgment  and  order  reversed  and  new  trial  ordered,  costs  to 
abide  event.' 

'  A  bill  is  drawn,  accepted,  and  indorsed  in  Kentucky,  where  all  the  parties 
reside,  but  is  addressed  "  To  C,  New  York,  N.  Y."  The  holder  knows  these 
facts.  The  bill  is  in  New  York  on  the  day  of  maturity.  Held,  Presentment  was 
sufficient.  If  the  instrument  is  payable  in  A.,  and  the  residence  of  the  maker  is 
in  B.,  presentment  should  be  in  A.      Cox  v.  National  Bank,  100  U.  S.  704.  —  Ed, 

NEGOT.   INSTRUMENTS  —  33. 


514  PRESENTMENT   FOR    PAYMENT.  [ART.  VII. 

§  133  BARNES  V.  VAUGHAN.  [§  73] 

6  Rhode  Island,  259.  —  iSsg. 

Action  by  holder  against  indorser.  At  the  trial  before  the  court, 
to  whom  the  case  was  submitted  in  fact  and  law,  under  the  general 
issue,  it  appeared  that  the  notes,  which  were  not  made  payable  at 
any  particular  place,  had  been  left  by  the  plaintiff  at  the  Mount 
Vernon  Bank,  in  Foster,  for  collection;  and  that  the  only  demand 
of  payment  made  upon  Northup,  the  maker,  was  by  the  usual 
printed  bank  notice,  mailed  to  him  by  the  cashier  of  the  bank,  and 
directed  to  him  at  Providence,  where  he  lived,  in  the  early  part  of 
the  months  in  which  they  respectively  fell  due,  although  at  what 
time  precisely,  the  cashier  of  the  bank  could  not  recollect.  Due 
notice  of  non-payment  by  the  maker  was  proved  to  have  been  given 
to  the  defendant. 

BoswoRTH,  J. — The  defence  to  this  suit  is,  that  no  legal  and 
proper  demand  was  made  on  the  maker  of  the  note;  and  that  there- 
fore the  indorser,  who  is  here  sued,  is  discharged.  The  rule  of  the 
common  law  is,  that  in  order  to  charge  the  indorser,  demand  must  be 
made  on  the  maker  for  payment  on  the  very  day  on  which  the  note 
becomes  due.  In  case  the  note  on  its  face  is  made  payable  at  a  par- 
ticular place,  as  at  a  bank  named,  it  is  necessary,  and  only  necessary, 
to  make  demand  at  such  place;  but  if  no  place  of  payment  is 
named  in  the  note  at  which  the  note  is  payable,  it  is  necessary  to 
present  the  note  to  the  maker  personally,  or  at  his  place  of  abode 
or  business,  before  the  indorser  can  be  made  chargeable.  In  this 
case,  no  place  of  payment  was  mentioned  in  the  notes.  The  notes 
were  left  at  the  Mount  Vernon  Bank  for  collection;  and  it  is  agreed, 
that  the  maker  had  notice  before  the  day  of  payment  that  they  were 
there  for  that  purpose.  This  notice  could  not  avail  to  make  the 
notes  payable  at  said  bank.  The  maker  had  not  by  the  terms  of  his 
contract  agreed  to  pay  the  notes  at  that  bank;  and  a  demand  there 
was  no  demand  upon  him.  It  was  necessary  that  demand  should 
be  made  upon  him  personally,  or  at  his  dwelling,  or  place  of  business, 
on  the  last  day  of  grace.  No  such  demand  was  made,  and  the 
indorser,  therefore,  was  never  charged. 

Judgment  must,  therefore,  be  rendered  for  the  defendant,  for  his 
costs.' 

'  The  anomalous  custom  prevails  in  Massachusetts  and  Maine  of  making  such 
a  demand  sufficient.  Mechanics"  Bank  v.  Merchants  Bank,  6  Met.  24;  Warren 
Bank  v.  Parker,  8  Gray,  221;  Gallagher  v.  Roberts,  11  Me.  4S9;  Maine  Bank  v. 
Smith,  18   Me.  99.     So  in   New   England  there  seems  to  be  a  local   custom  of 


II.  3- J  AT   WHAT    PLACE.  515 

§  133  BANK  OF    ORLEANS  r.  WHITTEMORE.  [§  73J 

12  Gray  (Mass.),  469.  —  1859. 

Action  by  holder  against  indorser.  Note  made  and  dated  in 
Boston,  but  maker's  residence  and  place  of  business  then  and  ever 
since  in  North  Carolina.  This  was  known  to  holder's  agent  at 
maturit3\      No  demand  on  maker  in  North  Carolina. 

Metcalf,  J.  [After  stating  the  facts.]  —  On  these  facts  the  ques- 
tion is,  whether  the  defendants  are  liable  as  indorsers.  If  they  are, 
it  is  not  because  seasonable  demand  was  made  on  the  promisor  and 
seasonable  notice  of  non-payment  given  to  them.  The  note  fell  due 
on  Saturday,  May  3d  —  the  last  day  of  grace  being  Sunday  —  and 
no  demand  was  made  on  the  promisor  until  nine  days  afterwards. 
This  delay  discharged  the  defendants  from  their  liability  to  the  plain- 
tiffs unless  the  fact  that  the  promisor  always  resided  in  North  Caro- 
lina excused  the  holders  from  making  personal  demand  on  him,  or 
from  using  due  efforts  to  make  such  demand.  The  plaintiffs  rely 
on  this  fact  to  sustain  their  action,  and  cite  the  decision  in  Smith  v. 
Philbyick  (10  Gray,  252),  as  conclusive  in  their  favor.  That  was  an 
action  by  an  indorser  against  a  prior  indorser  of  a  note  made  in 
Boston  by  one  whose  only  residence  and  place  of  business  were  in 
Texas,  and  on  whom  no  demand  was  made;  and  it  was  decided  that 
no  demand  on  him  was  necessary  to  charge  the  defendant.  The 
court  said  there  was  no  evidence  to  show  whether  the  plaintiff,  or 
any  of  the  subsequent  holders  of  the  note,  knew  where  the  promisor's 
residence  was;  that  if  his  residence  had  been  known  to  the  holder, 
at  the  maturity  of  the  note,  it  might  perhaps  have  been  incumbent 
on  him  to  forward  it  to  Texas  for  presentment,  as  was  held  in  Taylor 
V.  Snyder  (3  Denio,  145). 

In  the  case  before  us,  the  plaintiffs'  agent,  whom  they  employed  to 
purchase  and  also  to  collect  the  note,  knew  where  Moore's  residence 
was,  and  the  legal  effect  of  his  knowledge  of  that  fact  is  the  same  as 
would  have  been  the  effect  of  their  knowledge  of  it.  Notice  to  an 
agent,  whilst  he  is  concerned  for  the  principal,  is  notice  to  the  princi- 
pal himself.  And  we  are  of  opinion,  as  intimated  in  SmitJi  v.  Phil- 
brick,  that  by  reason  of  the  plaintiffs'  knowledge  (through  their 
agent)  of  the  place  of  Moore's  residence,  a  demand  on  him  there, 
and  seasonable   notice   of    his   default,    were    prerequisites    to    the 


drawing  notes  "  payable  at  any  bank  "  in  a  given  city,  and  in  such  case  it  is 
sufficient  that  the  instrument  is  at  any  bank  in  the  place  named  on  the  day  of 
maturity.  Maiden  Bank  v.  Baldwin,  13  Gray,  154;  Langley  v.  Palmer,  30  Me. 
467;  Jackson  V.  Parker,  13  Conn.  342.  —  Ed. 


5l6  PRESENTMENT   FOR   PAYMENT.  [ART.  VII. 

defendants'  liability  as  indorsers.  We  think  this  case  is  within  the 
general  and  familiar  rule  which  applies  to  the  holders  of  indorsed 
notes,  and  not  an  exception  to  that  rule. 

When  a  resident  in  the  State,  after  giving  a  note,  removes  from 
the  State  and  takes  up  a  residence  out  of  the  State,  it  has  been 
repeatedly  decided  that  it  is  not  necessary,  in  order  to  charge  an 
indorser  of  the  note,  to  demand  payment  of  the  promisor  at  his  new 
residence.'  This  exception  to  the  general  rule  which  requires 
demand  on  the  promisor,  and  notice  to  the  indorser,  seems  to  be 
established.  But  we  see  no  sufficient  reason  for  taking  the  present 
case  out  of  that  rule.  And  we  hold,  that  where  the  maker  of  a  note, 
when  it  is  made  and  indorsed,  has  a  known  residence  out  of  the 
State,  which  residence  remains  unchanged  at  the  maturity  of  the 
note,  demand  must  be  made  on  him,  or  due  diligence  used  for  that 
purpose,  and  notice  of  non-payment  given  to  the  indorser  before  the 
indorser  can  be  charged.  So  it  was  decided  by  the  court  of  appeals 
in  New  York,  in  Taylor  v.  Snyder,  before  referred  to,  and  in  Spies  v, 
Gilmore  (i  Comst.  321).     In  this  last  case,  Bronson,  J.,  said:  — 

"  The  only  excuse  which  has  been  offered  for  not  making  demand 
is,  that  it  would  have  been  inconvenient  to  go  or  send  to  Mata- 
moras  for  the  purpose.  It  is  often  inconvenient  to  present  the  note 
for  payment,  when  the  maker  and  holder  both  reside  in  the  same 
State;  and  yet,  when  the  maker  has  a  known  place  of  residence,  and 
there  has  been  no  change  of  circumstances  after  the  giving  of  the 
note,  mere  trouble  or  inconvenience  to  the  holder  has  never  been 
held  a  good  excuse  for  omitting  demand.  And  this  is  so,  however 
wide  asunder  the  maker  and  holder  may  live.  If  the  plaintiff 
wished  to  avoid  the  inconvenience  of  sending  to  Matamoras,  he 
should  have  made  the  note  payable  in  New  York,  or  got  an  indorse- 
ment with  a  waiver  of  demand.  He  has  no  right  to  change  the  con- 
tract which  the  indorser  made,  for  the  purpose  of  promoting  his  own 
convenience." 

Judgment  for  the  defendants. - 


'  Xr  Cruder  v.  Bank,  9  Wheat.  (U.  S.)  5()3.  —  Ed. 

2  Taylor  v.  Snyder,  3  Denio  (N.  Y.)  145  —  1S46.  Note  dated  Troy,  N.  Y.  Maker 
then  and  afterwards  resided  in  Florida,  to  the  knowledge  of  the  first  holder  and 
of  the  subsequent  indorsee  (plaintifif).  Presentment  (not  personal  or  at  maker's 
office  or  residence)  is  made  in  Troy.  Held,  Presentment  not  sufficient. 
"  Where  no  change  has  taken  place  in  the  residence  of  the  maker,  between  the 
making  of  the  note  and  the  time  of  its  payment,  the  intervention  of  a  state  line 
does  not  dispense  with  the  necessity  of  making  due  demand  of  payment." 


n.  4-]  TO    WHOM    MADE.  517 

§  133  PARKER  ,-.   KELLOGG.  [§  73] 

15S  Massachusetts,  90.  —  1S93. 

Action  by  holder  against  indorser.  Defence,  want  of  demand  on 
maker.  The  notes  specified  no  place  of  payment.  Presentment  was 
made  to  the  maker  personally  at  the  office  of  the  indorser. 

Field,  C.  J.  .  .  .  Whether  the  defendant's  office  was  Hart's 
place  of  business  or  not,  if  the  plaintiff  made  a  demand  upon  Hart 
personally  at  this  office  during  business  hours  of  the  last  day  of 
grace,  and  produced  the  notes,  and  Hart  said  that  he  was  unable  to 
pay  them,  and  made  no  objection  to  the  place  of  the  demand,  this 
would  be  a  sufficient  demand,  and  to  this  effect  were  the  instructions 
given  by  the  court.  {King  v.  Crotucll,  61  Maine,  244;  i  Danl.  Xeg. 
Insts.,  §  638,  ([4th  ed.]) 

Exceptions  overruled.^ 


4.  To  THE  Proper  Person. 
§  132  STINSON  V.  LEE.  [§  72] 

68  MississHTi,  113.  —  iSgo. 

Action  by  holder  against  indorser.  Demurrer  to  declaration 
sustained.     Plaintiffs  appeal. 

CcoPER,  J.,  delivered  the  opinion  of  the  court. 

The  demurrers  to  the  original  and  amended  declarations  were 
properly  sustained.  Lee  was  the  payee  in  a  promissory  note,  sub- 
scribed by  the  maker  thereof,  "  \  G,  Cunningham,  Ag't.,"  nothing 
appearing  on  the  face  of  the  note  indicating  for  whom  he  professed 
to  act  as  agent.  After  the  maturity  of  the  note  he  indorsed  the 
same  to  the  plaintiffs,  who  sometime  thereafter  presented  the 
note  to  S.  A.  Cunningham,  wife  of  A.  G.  Cunningham,  and  who, 
the  declaration  avers,  was  his  principal,  "and  demanded  payment 
thereof,  and  sued  out  an  attachment  for  rent  against  her,  in  order 
to  collect  said  note,  of  all  of  which  said  Lee  had  immediate  notice." 

The  present  suit  is  against  S.  A.  Cunningham  as  maker  and 
against  Lee  as  indorser  of  the  note. 

The  liability  of  Lee  rested  wholly  upon  his  indorsement,  and  that 
liability  was  to  pay  the  note,  if  seasonable  presentment  to  the  maker 
should  be  made  and  payment  refused,  and  Lee  notified  thereof. 

'  See  Sussex  Bank  v.  Baldzoiit,  17  N.  J.  L.  487,  aittty  p.  501. 


5i8  PRESENTMENT    FOR    PAYMENT.  [ART.  VII. 

A.  G.  Cunningham,  and  not  S.  A.  Cunningham,  was  the  maker  of 
the  note,  the  word  "  agent  "  following  his  signature  being  — in  the 
absence  of  the  name  of  the  principal  —  merely  dcscriptio  pcrso/ue. 
(i  Danl.  on  Neg.  Inst.,  §§  303-305-)  ^^'e  are  not  called  upon  to 
decide  whether,  in  a  proper  action,  Mrs.  S.  A.  Cunningham  might 
be  made  liable  on  the  consideration  for  which  the  note  was  given; 
nor  whether,  as  between  the  original  parties,  A.  G.  Cunningham  was 
liable  on  the  note.  The  sole  question  is  whether  Lee,  who  indorsed 
the  note  signed  by  "  A.  G.  Cunningham,  Ag't.,"  can  be  held  on  his 
indorsement  by  virtue  of  a  presentment  to  one  whose  name  nowhere 
appears  on  the  note,  and  we  think  that  he  cannot,  because  such  per- 
son was  not  the  maker  of  the  note,  for  whose  default  only  was  he 

bound  by  his  indorsement. 

Judgment  affirmed. 


§  136  TOBY  V.  MAURI  AN.  [§  76] 

7  Louisiana,  493.  —  1834. 

Action  against  indorser.  Defence,  want  of  due  presentment. 
Judgment  for  plaintiff  on  the  authority  of  Hale  v.  Burr  (12  Mass.  'S,6.) 

Martin,  J.,  delivered  the  opinion  of  the  court. 

The  defendant  is  sued  as  indorser  of  a  promissory  note,  for  one 
thousand  dollars,  executed  by  Peychaud.  Judgment  was  rendered 
against  him  for  the  amount  claimed.  He  now  claims  a  reversal  of 
the  judgment,  on  the  ground  that  he  was  condemned  as  indorser  to 
pay  the  sum  demanded,  when  payment  was  never  demanded  from 
the  maker,  nor  from  any  person  representing  him,  or  succeeding  to 
his  rights  and  obligations. 

The  record  shows  that  the  maker  died  on  the  last  day  of  grace,  or 
during  the  night  preceding  it.  That  when  the  notary's  clerk  called 
at  the  house  and  late  domicil  of  the  drawer  of  the  note  sued  on  to 
demand  payment,  he  found  no  person  present  except  a  mulatto 
woman,  who  informed  him  of  the  death  of  Peychaud,  and  pointed 
him  to  the  corpse  in  the  coffin.  The  note  was  then  protested,  with- 
out any  inquiry  or  demand  being  made  of  any  heir  or  representative 
of  the  deceased. 

It  is  clear  that  no  recourse  can  be  had  against  the  indorser  of  a 
note  until  a  demand  has  been  made  on  the  maker,  if  living,  or  on 
his  heir  or  legal  representative  after  his  death,  unless  the  impossi- 
bility of  making  such  a  demand  is  made  apparent.  This  has  not 
been  shown  in  the  present  case.     The  authorities  on  this  point,  and 


11.4-]  TO    WHOM    MADE.  519 

which  support  the  position  here  laid  down,  are  numerous,  of  the 
highest  character  and  authority,  and  conclusive  on  this  subject. 
(Chitty  on  Bills,  317,  ,ed.  1828;  Bayley,  do.  128;  2  Practical  Abr.  of 
Am.  Cases,  288,  292;  3  Peters,  89;  7  Id.  287;  7  Martin,  364;  i  Par- 
dessus,  392;  Pothier,  Contrat  de  Change,  No.  146.) 

It  is  therefore  ordered,  adjudged  and  decreed,  that  the  judgment 
of  the  District  Court  be  annulled,  avoided  and  reversed;  and  that 
judgment  be  entered  for  the  defendant,  with  costs  in  both  courts.' 


137  CAYUGA    COUNTY  BANK  v.   HUNT.  [§  77] 

2  HiLL(N.  Y.),  635. 
[Reported  herein  at  p.  646.] 


§  138  BLAKE  V.   McMILLEN.  [§  78] 

33  Iowa,  150.  —  1871. 

Action  against  indorser  of  a  note  made  by  W.  G.  Harding  and 
Daniel  Van  Patter.  Presentment  and  demand  on  Harding  alone. 
Judgment  for  plaintiff. 

Miller,  J.  — On  a  former  appeal  in  this  case,  it  was  held  that  a 
presentment  to  one  only  of  the  two  joint  makers  was  not  sufificient  to 
charge  the  indorser,  unless  some  legal  excuse  be  shown  for  the 
failure  to  make  presentment  to  the  other.  {Blake  v.  AIcMillcn,  22 
Iowa,  358.)  The  agreed  facts  show  that  David  Van  Patter  died 
before  the  maturity  of  the  note;  that  Eliza  Van  Patter  was  his  legal 
representative  when  the  note  became  due  and  no  excuse  is  shown 
for  a  failure  to  make  presentment  to  her.  Following  the  ruling  on 
the  former  appeal  the  judgment  is 

Reversed.^ 

'  Although  the  indorser  be  the  administrator  or  executor  of  the  deceased 
maker,  demand  must  be  made  upon  him  as  executor  and  notice  given  to  him  as 
indorser.  Magruder  v.  Unioti  Bank,  8  Curtis  Dec.  299,  3  Peters,  87;  Groth  v. 
Gyger,  31  Pa.  271.  —  En. 

'Accord:  Arnold  v.  Dresser,  8  Allen  (Mass.)  435;  Shutts  v.  Fingar,  100  N.  Y. 
539;  Benedict  \.  Schmieg,  13  Wash.  476.  —  Ed. 


520  PRESENTMENT   FOR   PAYMENT.  [ART.  VII. 

5.   By  Exhibiting  the  Instrument. 

§  134  OCEAN  NATIONAL  BANK  r.   FANT.  [§  74] 

50  New  York,  474.  —  1S72. 

Action  by  holder  against  indorser,  after  alleged  presentment, 
demand  and  notice.  Defendant  contends  there  was  no  proper  pre- 
sentment or  demand.      Judgment  for  defendant, 

Rapallo,  J.  —  The  note  upon  which  the  defendant  is  sued,  as 
indorser,  contains  a  statement  that  the  maker  has  deposited  with 
the  payee,  as  collateral  security,  certain  railroad  bonds,  with 
authority  to  sell  them  without  notico  in  case  of  non-payment  of  the 
note;  and  it  is  found  as  a  fact  that  these  collaterals  came  to  the 
hands  of  the  plaintiff  when  it  became  the  holder  of  the  note. 

We  think  that  the  court  below  was  clearly  right  in  holding  that  an 
agreement  to  restore  these  collaterals  to  the  maker,  on  payment  of  the 
note,  is  to  be  implied  from  the  transcation  as  stated  in  the  instrument 
itself,  and  that  the  acts  should  be  simultaneous.  The  right  of  the 
maker  to  receive  these  collaterals  when  he  should  pay  the  note  stood 
upon  the  same  footing  as  his  right  to  the  surrender  of  the  note  itself; 
and,  laying  out  of  view  special  cases  of  lost  notes,  it  is  well  settled 
that,  to  constitute  a  valid  demand,  the  note  must  be  produced,  and 
ready  to  be  surrendered  on  payment.'  (Story  on  Prom.  Notes, 
§§445,  448,  107;  S/f/////  V.  RockivcU,  2   Hill,  482;  Edwards  on  Bills, 

503,  504-) 

It  would  be  most  unreasonable  to  require  the  maker  to  pay  such 
a  note  in  the  absence  of  the  collaterals,  which  frequently  consist  of 
negotiable  securities,  and  to  trust  to  his  legal  remedies  against  the 
holder  to  recover  them. 

It  is  found  as  a  fact  that,  at  the  time  payment  of  the  note  was 
demanded  of  the  maker,  he  demanded  of  the  notary  presenting  it  a 
return  of  the  collaterals,  and  stated  that  he  was  ready  and  willing  to 
pay  the  note  on  production  of  the  collaterals;  but  that  the  notary 
did   not  have  them,  and   the  maker's  refusal  to  pay  was  on  the  sole 


'"  No  valid  presentment  and  demand  can  be  made  by  any  person  without 
having  the  note  in  his  possession  at  the  time,  so  that  the  maker  may  receive  it 
in  case  he  pays  the  amount  due,  unless  special  circumstances,  such  as  the  loss 
of  the  note  or  its  destruction,  arc  shown  to  excuse  its  absence."  Arnold  v. 
Dresser,  8  Allen  (Mass.)  435;  Musson  v.  Lake,  4  How.  (U.  S.)  262.  But  if  the 
one  making  demand  has  the  instrument  but  does  not  exhibit  it,  the  presentment 
is  good  where  the  maker  does  not  ask  tc  see  the  instrument,  but  refuses  pay- 
ment on  other  grounds.  Legg  v.  Vinal,  165  Mass.  555.  See  IVaringv.  Beits,  go 
Va.  46,  post,  p.  524.  —  Eu. 


III.]  \YHEN    DELAY    EXCUSED.  521 

ground  that  the  collaterals  were  not  produced.  Without  any  further 
demand,  and  without  showing  any  tender  or  even  the  production  of 
the  collaterals,  ready  to  be  surrendered,  the  defendant  was  sued  as 
indorser. 

The  case  contains  evidence  sustaining  the  findings,  and  we  think 
the  conclusion  was  correct  that  the  collaterals,  not  being  produced 
or  in  readiness  to  be  surrendered  on  payment  of  the  note,  and  the 
refusal  being  on  that  ground  alone,  the  demand  and  refusal  proved 
were  insufficient  to  charge  the  indorser. 

The  judgment  should  be  affirmed,  with  costs.' 


134  FOLGER  V.   CHASE.  [§  74] 

18  Pickering  (Mass.),  63.  —  1836. 
\Reported  herein  at  p.  349.]  ^ 


III.  When  delay  in  presentment  excused. 

§  141  PIER  V.   HEINRICHSHOFFEN.  [§  81] 

67  Missouri,  163.  —  1S77. 

Hough,  J.  —  This  was  an  action  brought  by  the  plaintiffs,  as 
holders  of  a  negotiable  promissory  note,  against  the  defendants,  as 

'  L  presentment  is  made  at  the  house  or  office  of  the  maker,  and  it  is  closed, 
c  n  person  is  found  there  authorized  to  act  or  answer,  the  presentment  is  com- 
pl  te.  Wiseman  v.  Chiappella,  23  How.  (U.  S.)  368;  Struthers  v.  Kendall,  41  Pa. 
214.  —  Ed, 

-  Where  an  instrument  is  payable  at  a  bank  it  is  sufficient  that  the  instrument 
be  in  the  bank  on  the  day  of  maturity;  the  formal  demand  is  made  by  the  bank 
upon  the  maker's  account,  and  if  that  be  not  sufficient  to  meet  the  note  or  bill, 
th  instrument  is  dishonored,  i  Daniel  on  Neg.  Inst.,  §  656.  But  it  is  held 
th  •:  the  physical  presence  of  the  instrument  in  the  bank,  unknown  to  the 
officers  (as  where  the  letter  in  which  it  was  sent  was  mislaid  unopened),  is  not 
a   presentment   and    demand.      Chicopee   Bank   v.    Philadelphia   Bank,    8    Wall. 

(U.  S.)  641. 

I  147  [87]-  Whether,  if  a  note  is  payable  at  a  bank  and  is  there  presented, 
the  bank  is  bound  to  pay  it  in  case  the  maker  has  a  sufficient  deposit,  has  been 
a  matter  of  much  doubt.  See  Morse  on  Banks  and  Banking  (3d  ed.),  g^  556- 
5C4.  It  has  been  held  that  it  is  authorized,  but  not  bound,  to  pay.  Bedjord 
Bank  V  Acoam,  125  Ind.  584.  Contra:  Grissom  v.  Commercial  N.  B.,  87  Tenn. 
350  It  has  been  held  that  it  is  bound  to  pay  out  of  the  deposit  if  the  bank 
itself  holds  the  note.  German  .V.  B.  v.  Foreman,  138  Pa.  St.  474-  But  not  out  of 
the  deposit  of  an  indorser,  though  he  is  known  to  be  the  principal  debtor. 
First  JV  B  V  Feltz,  176  Pa.  St.  513:  though  it  may  do  so,  Mechanics',  etc. 
Bank  V.  Seitz,  150  Pa.  St.  632.  See  .Etna  X.  B.  v.  Fourth  AT.  B.,  46  N.  Y.  82; 
Indig  V.  National  City  Bank,  80  N.  Y.  106;  National  Bank  v.  Smith,  66  N.  Y. 
271.  —  Ed. 


522  PRESENTMENT    FOR    PAYMENT.  [ART.  VII. 

indorsers  thereof.  The  questions  presented  for  determination  are, 
whether  the  plaintiffs  used  due  diligence  in  making  demand  of  pay- 
ment, and  gave  the  requisite  notice  of  non-payment  to  the  defend- 
ants. The  facts  are  as  follows:  The  note  in  question  matured  on 
the  4th  day  of  July,  1861,  and  was  payable  at  the  banking  house  of 
F.  and  G.  Willins,  in  the  city  of  St.  Paul,  Minnesota.  Some  time 
in  April,  1861,  the  plaintiffs  delivered  the  same  to  the  bank  of 
Cooperstown,  at  Cooperstown,  New  York,  for  collection.  At  that 
time  a  letter,  in  due  course  of  mail,  would  reach  St.  Paul  from 
Cooperstown  in  about  six  days.  The  cashier  of  the  bank  of  Coopers- 
town sent  the  note  by  mail  to  its  regular  correspondent,  the  Bank 
of  St.  Paul,  in  the  city  of  St.  Paul,  for  collection,  in  ample  time,  as 
the  cashier  stated,  for  it  to  reach  its  destination  by  ordinary  course 
of  mail,  before  the  maturity  of  the  note.  When  the  letter  reached 
St.  Paul,  the  Bank  of  St.  Paul  had  made  an  assignment,  and  the 
envelope  having  printed  on  it  the  words  "  From  the  Bank  of  Coopers- 
town," the  postmaster  at  once  returned  it  to  the  Bank  of  Coopers- 
town, with  the  indorsement  "bank  failed."  The  letter  was 
received  by  the  Cooperstown  Bank  in  the  original  envelope, 
unopened,  on  the  9th  day  of  July,  1861,  and  on  the  same  day  the 
note  was  returned  by  mail  to  St.  Paul  in  a  letter  directed  to  F.  &  G. 
Willins,  who  caused  it  to  be  presented  and  protested  on  the  15th 
day  of  July,  1861,  the  day  on  which  it  was  received. 

The  defendants  contend  that  there  was  a  want  of  diligence  in  not 
sending  the  note  in  time  to  guard  against  such  contingencies  as  the 
evidence  discloses,  and  that  the  action  of  the  postmaster  in  the 
premises  is  no  sufficient  excuse  for  the  failure  to  present  for  pay- 
ment on  the  day  of  the  maturity  of  the  note.  Professor  Parsons,  in 
his  treatise  on  Notes  and  Bills,  says:  "  Ordinarily  any  failure  to 
present  a  note  at  the  proper  time,  by  reason  of  the  negligence  of  an 
agent,  would  discharge  an  indorser,  but  where  the  holder  makes  use 
of  the  public  mail  for  the  purpose  of  transmitting  the  note  to  the 
proper  place  in  season  to  have  a  legal  demand  made,  and  without 
any  negligence  on  his  part,  we  should  say  that  he  would  not  lose  his 
remedy  on  an  indorser,  if  through  any  accident  or  disorder,  or  the 
negligence  or  mistake  of  the  postofifice  clerks,  the  note  does  not  reach 
the  destined  place  in  season  to  make  demand  on  the  very  day  of 
maturity."  (Vol.  i,  p.  461.)  In  support  of  his  text  he  cites  the 
case  of  Windham  Bank  v.  Norton  (22  Conn.  213). 

We  have  been  referred  by  defendants'  counsel  to  the  case  of  SchO' 
field  V.  ^^riYz/v/ (3  Wend.  4SS),  as  being  in  direct  conflict  with  the 
case  just  cited  from  Connecticut;  but  a  careful  examination  of  the 
facts  in  Schofield  \ .  Bayard  \;\\\  show  that  there  is  no  conflict  what- 


IV.]  WHEN   DISPENSED    WITH.  523 

ever  between  the  two  cases.  ...  It  will  be  seen  that  the  court 
places  its  judgment  expressly  upon  the  ground  that  the  holder  was 
guilty  of  negligence  in  sending  the  bill  to  Liverpool,  and  this  fault 
of  his  produced  the  impossibility  by  virtue  of  which  he  claimed  to  be 
discharged.  In  the  present  case  the  letter  containing  the  note  was 
not  misdirected;  it  was  properly  directed;  it  actually  reached  St. 
Paul  in  time,  and  but  for  its  unauthorized  return  by  the  postmaster, 
the  probabilities  are  that  some  agent  or  representative  of  the  sus- 
pended bank  would  have  received  it  in  time  to  make  due  present- 
ment, as  the  testimony  tends  to  show  that  the  representatives  of  the 
bank  continued  to  receive  letters  addressed  to  it,  after  its  suspen- 
sion. The  holders  therefore  exercised  due  diligence  in  sending  the 
note  when  they  did;  its  arrival  in  time  demonstrates  that  fact;  and 
they  were  not  required  to  make  provision  in  advance  for  a  possible, 
but  unanticipated  suspension  of  the  bank  of  St.  Paul  before  arrival 
of  their  letter,  or  for  an  unwarrantable  interference  with  the  same 
by  the  public  ofificer  in  charge  of  the  mails,  after  its  arrival.  We  are 
of  the  opinion,  therefore,  that  under  the  circumstances  of  this  case, 
the  demand  was  seasonably  made. 

[The  court  then  decides  that  a  notarial  certificate  stating  that  the 
notices  were  "  put  into  the  postoffice  at  St.  Paul  directed  as  follows," 
is  sufficient  without  a  statement  that  the  postage  was  prepaid.]' 

Reversed.' 


IV.  When  presentment  dispensed  with. 

I.  When  No  Right  to  Require  or  Expect  It. 

§  139  CATHELL  7'.  GOODWIN.  [§  79] 

I  Harris  &  Gill  (Md.),  468. 

\^Reported  herein  at  p.  560.]  ^ 


•  See  Neg.  Insl.  L.,  §  176  [105].  —  Ed. 

2  See  also  Schofald  v.  Bayard,  3  Wend.  (N.  Y.)  488,/^^/,  p.  655;  i  Daniel, 
§  478.  —  Ed. 

'See  also  §  185  [114],  186  [115];    Cashman  v.  Harrison,  90  Calif.  297. 

Mere  want  of  funds  in  drawee's  hands  not  enough  to  excuse  presentment 
Knickerbocker  Life  Ins.  Co.  v.  Pendleton,    112   U.  S.  696,  70S;    Welch  v.  Mfg.  Co., 

82  111.  579-  , 

If  drawer  or  indorser  has  received  funds  or  assets  from  the  acceptor  or  maker 
under  an  agreement  to  pav  the  bill  or  note,  he  has  no  right  to  expect  or  require 
demand  and  notice.  IVright  v.  Andrews,  70  Me.  86.  Query,  When  he  has 
received  security  but  with  no  agreement  to  pay.  2  Daniel  on  Neg.  Inst., 
^^  1129-1143:  4  Am.  &  Eng.  Enc.  Law  (2d  ed.),  447-448. 

'^An   accommodated    drawer  or   indorser   is  not   entitled   to   presentment  and 
notice.     2  Danid  on  Neg.  Inst.,  §§  1085-1089.  —  Ed. 


524  PRESENTMENT    FOR    PAYMENT.  [ART.  VII. 

2.   When  Impossible. 

§  142  MOORE  V.   COFFIELD.  [§  82] 

I  Devereux  Law  (N.  Car.),  247.  —  1827. 

Action  against  indorser.     Judgment  for  defendant. 

Hall,  J.  .  .  .  It  was  proved  that  Best,  the  maker  of  the 
obligation,  was  a  seafaring  man,  and  at  or  about  the  time  the  obliga- 
tion became  payable,  sailed  from  Washington,  as  master  of  a  vessel 
bound  to  New  York;  and  it  did  not  appear  that  he  had  a  domicil, 
or  any  establishment  within  the  State,  at  which  payment  could  be 
demanded.  The  maker  being  at  sea,  in  his  usual  employment,  and 
the  indorsee  not  being  bound  to  follow  him  beyond  the  State,  it  fol- 
lows, that  if  he  had  no  such  domicil  or  establishment,  a  demand 
should  be  dispensed  with. 

In  this  view  of  the  case,  the  defendant  was  liable  upon  his  indorse- 
ment, without  any  express  promise  to  pay,  and  the  jury  should  have 
been  so  instructed  —  and  consequently,  for  the  judge's  omission  to 
give  such  instruction,  there  must  be  a  new  trial. 

Per  Curiam.  —  Judgment  reversed  and  a  new  trial  awarded.' 


§  142  WARING  V.   BETTS.  [§  82] 

go  Virginia,  46.  —  1893. 

Action  against  indorsers  of  a  note  payable  at  the  Business  Men's 
Bank,  Richmond.  At  maturity  the  bank  was  defunct.  Demand 
(without  presentment)  was  first  made  on  W.,  a  former  officer  of  that 
bank  (and  also  one  of  the  indorsers),  who  replied  that  the  funds  had 
been  distributed  and  there  were  no  assets.  Later  in  the  day,  at  5  130 
p.  M.,  the  notary  with  the  note  in  his  possession  went  again  to  the 
office  of  W.,  but  it  was  closed;  he  then  went  to  the  residence  of  W., 
but  he  was  not  there.  He  then  protested  the  note  and  gave  due 
notice  to  the  indorsers.  The  maker  lived  at  Danville,  Va.,  at  which 
place  the  note  was  dated. 

Lacv,  J.  (after  stating  the  case),  delivered  the  opinion  of  the 
court. 

The  first  question  arising  here  is  that  raised  by  the  demurrer. 
The  declaration  states  a  good  case,  and  sets  forth  that  on  its  due 
day  it  was  duly  presented  for  payment  of  the  sum  of  money  therein 

'  But  if  the  maker  have  a  residence,  presentment  must  be  made  there. 
Dcnuic  V.    Walkei-,  7  N.  H.  199. 

Demand  is  not  excused  because  the  maker  is  an  infant.  Wyma7i  v.  Adajns.  12 
Cush.  (Mass.)  210.  —  Ed. 


IV.]  WHEN    DISPENSED    WITH.  525 

specified,    required,    payment   refused,    and    tliat   it  was   duly  pro- 
tested, etc. 

And  tiie  defendants'  demurrer  tu  the  plaintiff's  declaration  was 
properly  overruled. 

T'ne  claim  of  the  defendants  is  that  there  was  no  presentment  of 
the  note,  because  when  payment  was  demanded  of  the  indorser,  W. 
L.  Waring,  Jr.,  manager  of  the  late  Business  Glen's  Bank,  Mr.  Glenn 
did  not  have  the  note  in  his  possession,  and  could  not  have  presented 
it,  but  as  has  been  seen  from  the  facts  found  by  the  jury,  payment 
was  refused  by  Waring,  and  the  note  not  asked  for,  but  payment 
refused,  and  the  statement  made  that  he  was  not  authorized  to 
represent  the  bank,  which  had  ceased  to  do  busmess  and  had  dis- 
tributed its  assets. 

Presentment  of  the  bill  or  note  and  demand  of  payment  should  be 
made  by  an  actual  exhibition  of  the  instrument  itself;  '  or  at  least 
the  demand  of  payment  should  be  accompanied  by  some  clear 
indication  that  the  instrument  is  at  hand  ready  to  be  delivered,  and 
such  must  really  be  the  case.  This  is  requisite  in  order  that  the 
drawer  or  acceptor  may  be  able  to  judge  (i)  of  the  genuineness  of 
the  instrument ;  (2)  of  the  right  of  the  holder  to  receive  payment ;  and 
(3)  that  he  may  immediately  reclaim  possession  of,  upon  paying  the 
amount.  If,  on  demand  of  payment  the  exhibition  of  the  instru- 
ment is  not  asked  for,  and  the  party  of  whom  demand  is  made 
decline  on  other  grounds,  a  formal  presentment  by  actual  exhibition 
of  the  paper  is  considered  as  waived.  (Daniel  on  Neg.  Inst.,  p.  485, 
§654,  citing  Lockwood  v.  Cra'ci'ford ^  iS  Conn.  361,  and  Fall  River 
Union  Bank  v.    IVillard,  5  Metcalf,  216.) 

All  the  parties  subsequent  to  the  principal  payer  are  bound  only 
as  his  guarantors,  and  promise  to  pay  only  on  condition  that  a  proper 
demand  of  payment  be  made,  and  due  notice  be  given  to  them  in 
case  the  note  or  bill  is  dishonored.  And  we  repeat  this  as  one  of 
the  fundamental  principles  of  the  law  of  negotiable  paper;  and  the 
infrequency  and  the  character  uf  the  circumstances  which  will  excuse 
the  holder  from  making  this  demand,  and  still  preserve  to  him  all 
his  rights  as  effectually  as  if  it  were  made,  will  illustrate  the 
stringency  of  the  rule  itself.  (Parsons  on  Notes  and  Bills,  vol.  i, 
442.)  The  question  of  excuse,  then,  will  depend  upon  whether  due 
diligence  has  been  used,  and  presents  the  ordinary  inquiry  as  to 
negligence.  The  principal  excuses  resolve  themselves  into  two 
classes  — 

First.   The  impossibility  of  demand. 

1  See  §  134  [74]-  —  EiJ. 


526  PRESENTMENT   FOR   PAYMENT.  [ART.  VII. 

Second.  The  acts,  words,  or  position  of  a  party,  proving  tiiat  he 
had  not  right,  or  waived  all  right,  to  the  demand,  of  the  waiver  of 
which  he  would  avail  himself. 

That  impossibility  should  excuse  non-demand  is  obvious,  for  the 
law  compels  no  one  to  do  what  he  cannot  perform.  But  it  must  be 
actual  and  not  merely  hypothetical;  and  though  it  need  not  be  abso- 
lute, no  slight  difficulty  will  have  this  effect.      (/'/.) 

The  circumstances  which  will  excuse  a  demand  are  such  generally 
as  apply  to  a  failure  to  present  and  demand  payment  within  the 
required  time,  not  absolutely.     (Parsons,  444,  445.) 

In  this  case  the  presentment  of  the  note  was  not  made  at  bank 
within  the  usual  bank  hours,  with  the  note  in  possession,  but  as 
we  have  seen,  this  was  excused  in  this  case  (i)  by  the  fact  that  there 
was  no  bank  to  present  it  at,  and  (2)  because  payment  was  refused 
upon  the  ground  that  the  bank  had  ceased  to  do  business,  and  its 
assets  distributed,  and  the  note  was  not  asked  for,  nor  required, 
payment  being  refused  on  other  grounds;  the  right  to  have  it  pro- 
duced must  be  considered  as  waived. 

The  note,  however,  was  carried,  during  the  day,  to  the  place  of 
business  of  the  late  manager  of  the  bank,  and  the  indorser  sought  to 
be  charged,  and  this  being  closed,  it  was  carried  to  his  residence, 
and  that  being  also  closed,  it  could  not  be  presented  to  him,  and 
although  it  was  not  in  banking  hours,  it  was  during  the  daytime  and 
before  the  hours  of  rest. 

When  the  note  is  payable  at  a  bank,  it  is  to  be  presented  during 
banking  hours;  and  the  payer  is  allowed  until  the  expiration  of 
banking  hours  for  payment.  But  when  not  to  be  made  at  bank,  but 
to  an  individual,  presentment  may  be  made  at  any  reasonable  time 
during  the  day  during  what  are  termed  business  hours,  which,  it  is 
held,  range  through  the  whole  day  to  the  hours  of  rest  in  the  even- 
ing. (Parson,  447,  citing  Cayuga  County  Bank  v.  Hunt,  2  Hill,  635 ; 
Nelson  V.  Fottcrall,  7   Leigh,  194.) 

And  in  the  case  of  Farnstvorth  v.  Allen  (4  Gray,  453),  a  present- 
ment made  at  9  p.  m.  at  the  maker's  residence,  ten  miles  from 
Boston,  when  he  and  his  family  had  retired,  was  held  sufficient. 

And  in  Barclay  v.  Bailey  (2  Campb.  527)  Lord  EUenborough  sus- 
tained a  presentment  made  as  late  as  8  p.  m.  at  the  house  of  a  trader. 

It  is  only  where  presentment  is  at  the  residence  that  the  time  is 
extended  into  the  hours  of  rest.  If  it  is  at  the  place  of  business,  it 
must  be  during  such  hours  when  such  places  are  customarily  open, 
or,  at  least,  while  some  one  is  there  competent  to  give  an  answer. 
(Parsons,  448.) 

In  this  case   there   was   no  presentment  to  the  maker,  who  could 


IV.]  WHEN   DISPENSED    WITH.  52/ 

not  be  found,  which,  however,  was  unnecessary  under  section  2842 
of  the  Code  of  Virginia.  The  protest  was  in  due  form,  and  duly- 
protested,  which  was  authorized  by  section  2849  of  the  Code, 
although  the  said  note  was  payable  at  a  bank  in  this  State.  And 
under  section  2S50  is  prima  facie  proof  of  the  facts  stated  therein, 
and  is  substantially  in  accordance  with  the  finding  of  the  jury.  It 
therefore  appears  that  such  presentment  as  was  requisite  was  made 
to  the  indorser  and  late  manager  of  the  bank,  and  that  it  was 
impossible  to  present  the  same  at  the  bank  named  therein,  as  it  had 
ceased  to  exist.  We  must,  therefore,  conclude  that  there  has  been 
sufficient  diligence  on  the  part  of  the  plaintiff,  and  that  the  judgment 
cf  the  court  below  in  his  favor  was  right,  and  should  be  affirmed. 

Judgment  affirmed. 


3.   By  Waiver. 

See  Gove  v.  Vining,  7  Met.  (Mass.)  2x2^  post,  p.  564. 
Curtis  v.  Sprague,  51  Calif.  239,  ante,  p.  268. 
§§  180-182  [109-1 11]. 


V.  Payment  in  due  course. 

See  Article  IX.     "  Discharge  of  Instruments." 


ARTICLE   VIII. 

Duties  of  Holder  :  Notice  of  Dishonor. 
I,  Notice  necessary  to  charge  drawer  op  indopser. 

^  l6o  LONG  V.  STEPHENSON.  [§  89] 

72  North  Carolina,  569.  —  1S75. 
[Reported  herein  at  p.  474.]  ' 


II.  What  constitutes  sufficient  notice. 

I.   By  Whom  Notice  Must  be  Given. 

§  161  chanoine  v.  fowler.  [§  90"^ 

3  Wendell  (X.  Y.),  i73-  —  ^829. 

Action  against  drawer  of  a  bill.      Judgment  for  plaintiffs. 

By  the  Court,  Marcy,  J.  [After  deciding  that  there  was  no  suffi- 
cient proof  that  the  protest  in  France,  which  did  not  conform  to  the 
rules  of  the  law  merchant,  did  conform  to  the  rules  of  the  French 
Commercial  Code.] 


1  Notice  of  non-acceptance,  whether  presentment  for  acceptance  be  necessary 
or  not  (§  240  [143])  must  be  given  in  case  presentment  for  acceptance  is  in  fact 
made,  (g  247  [150]  ).  Blesard  v.  Hirst,  5  Burr.  2670;  Thompson  v.  Gumming,  2 
Leigh  (Va.)  321;  Watson  \.  TarpLy,  iS  How.  (U.S.)  517.  The  neglect  is  not 
cured  by  a  subsequent  presentment  for  payment  followed  by  notice  of  dishonor. 
Smith  V.  Roach,  7  B.  Mon.  (Ky.)  17.  But  if  the  bill  pass  into  the  hands  of  a 
holder  in  due  course  after  a  dishonor  by  non-acceptance  he  may  charge  a 
drawer  or  indorser  by  a  subsequent  notice  of  dishonor  for  non-acceptance  or 
non-payment.  Dunn  v.  O'Keeffe,  5  M.  &  S.  282.  See  §  188  [117].  If  after  a 
note  is  overdue  it  is  indorsed  and  transferred,  the  indorser  is  entitled  to  notice 
the  same  as  the  indorser  of  a  note  payable  on  demand.  Beer  v.  Clifton,  98 
Gal.  323.     See  Leavitt  v.  Putnam,  3  N.  Y.  494,  ante,  p.  356. 

The  indorser  of  a  non-negotiable  note  is  not  absolutely  entitled  to  notice  of 
dishonor  as  his  contract  is  that  of  guarantor.  Cromwell  v.  Hewitt,  40  N.  Y. 
4qi;  (cf.  Xezvman  v.  Frost,  52  N.  Y.  422);  unless  in  jurisdictions  where  a  guar- 
antor is  absolutely  entitled  to  notice.  Sutton  v.  Owen,  65  N.  Car.  123.  See 
ante,  pp.  346-34S.  —  Ed. 

[52S] 


n.   I.]  BY    WHOM    GIVEN. 


529 


To  determine  whether  the  defendant  had  legal  notice  of  the  non- 
acceptance  of  the  bill,  it  will  be  necessary  to  see  when  it  was  given, 
and  from  whom  it  came.     Messrs.  Sewalls  had  transmitted  the  bill 
to   France,  and   received  information  of   its  non-acceptance  on  the 
fourth  or  fifth  of  April.     H.  D.  Sewall  says  he  did  not  himself  give 
notice  thereof  to  the  defendant,  nor  does  he  know  that  notice  was 
given  by  his  house;  although  it  was  their  custom  to  give  notice  in 
such   cases,   and  he  has  no  doubt  the  defendant  received  it.     He 
learned,  from  a  conversation  with  the  defendant  between  the  time 
of  receiving  notice  and  the   14th  of  April,  that  he  had  knowledge 
that  the  bill  was  dishonored.     The  judge,  at  the  trial,  ruled  that  if 
the  defendant  had   notice  in  due  time  of  the  non-acceptance  of  the 
bill,  it  was  no  matter  whence  it  came,  it  was  available  to  the  plain- 
tiffs.    The  rule  of  law  in  relation  to  the  notice  was,  I  apprehend, 
laid  down  in  a  manner  too  broad  and  unqualified.     The  rule  has 
heretofore  fluctuated;  but  it  never  has  been  authoritatively  stated, 
as  I  can  find,  to  be  as  the  judge  laid  it  down  on  the  trial,  except  in 
the  case  of  Shmv  v.  Coates,    at  the  sittings   before  Lord   Kenyon, 
mentioned  in  Selwyn's  X.  P.  320,  n.  25.     Repeated  decisions  since, 
both  in  term  and  at  7i{st  prins,    have  qualified  and   restricted   the 
broad  proposition  of  the  judge  in  this  case,  and  of  Lord  Kenyon  in 
the  case  of  Shaw  v.  Coates.     In  some  instances,  it  has  been  decided 
that  the  holders  or  their  agents  are  the  only  persons  to  give  notice 
of  the  dishonor  of  bills;  but  it  seems  to  be  now  settled  that  it  is  not 
absolutely  necessary  that  the  notice  should  come  from  the  holder  of 
a  bill,  but  may  be  given  by  any  person  who  is  a  party  to  it,  and  who 
would,  on  the  same  being  returned  to  him,  have  a  right  of  action  on 
it.     (Chitty  on  Bills,  229;  2  Campb.  373;   i  Stark.  R.  29;  Bayley  on 
Bills,  161.)     A  notice   from  a  mere  stranger  is  not  sufficient;  and 
the  charge  of  the  judge  was  broad  enough  to  sanction  such  a  notice. 
For  the  insufficiency  of  the  proof  of  the  French  Commercial  Code  and 
of  the  protest  of  the  bill,  and  the  misdirection  of  the  judge  as  to  the 
notice,  a  new  trial  ought  to  be  granted. 

New  trial  frranted.' 


'  Notice  by  the  maker  is  not  sufficient.  Jagger  v.  National  German-Am.  Bank, 
53  Minn.  386.  Nor  by  the  drawee.  Stanton  v.  Blossom,  14  Mass.  116.  Nor  by 
the  acceptor.  Harrison  v.  Ruscoe,  15  M.  &  W.  231.  The  contrary  doctrine  has 
no  foundation  in  principle,  and  may  now  be  regarded  as  ended  by  the  Neg. 
Inst.  Law,  wherever  that  is  in  force.  See,  however,  2  Daniel  on  Neg.  Inst., 
§  990.  —  Ed. 

negot.  instruments  —  34. 


530  NOTICE   OF   DISHONOR.  [ART.  VIII. 

§  i6l  LYSAGHT  V.  BRYANT.  [§  90] 

9  Common  Bench  (C.  P.),  46.  —  1850. 

Action  by  holder  against  drawer.  Defendant  drew  the  bill  to  his 
own  order  and  indorsed  it  to  L.  &  S.  who  indorsed  it  to  plaintiff, 
but  L.  continued  to  hold  it  as  plaintiff's  agent.  The  bill  was  pre- 
sented by  L.  and  dishonored,  whereupon  L.  &  S.  gave  defendant 
notice  in  their  firm  name.  Verdict  for  plaintiff.  Defendant  moves 
for  a  rule  nisi  to  enter  the  verdict  for  the  defendant. 

Maule,  J.  —  I  am  of  opinion  that  the  notice  of  dishonor  that  was 
given  in  this  case,  was  sufficient.  Lysaght,  the  younger,  appears 
to  have  acted  as  the  agent  of  his  father,  the  plaintiff.  In  that 
character,  he  received  the  bill  from  Lysaght  &  Smithett,  by  whom  it 
was  sworn  to  have  been  indorsed  before  it  became  due;  and  Lysaght 
the  younger  proved  that  it  had  ever  since  been  kept  by  him  amongst 
the  documents  which  were  held  by  him  for  his  father.  It  was 
undoubtedly  his  duty  to  see  that  his  father  should  have  all  proper 
remedies  upon  the  bill.  The  bill,  it  seems,  was  presented  on  the 
day  it  became  due,  and  was  dishonored;  and  due  notice  of  dis- 
honor was  given  by  Lysaght  &  Smithett  to  the  defendant,  as  drawer. 
Lysaght,  the  younger,  having  due  notice  of  the  dishonor,  which 
operated  as  a  notice  to  Lysaght  &  Smithett,  it  was  clearly  compe- 
tent to  the  latter,  according  to  the  decided  cases,  to  give  notice  to 
all  prior  parties  to  the  bill,  and  a  notice  so  given  would  enure  as  a 
notice  by  the  party  who  had  given  notice  to  them.  I  therefore  think 
the  defendant  has  had  a  sufficient  notice  of  dishonor.      .      .      . 

Cresswell,  J.  ...  It  seems,  from  the  cases,  that  the  holder 
of  a  bill  may  avail  himself  of  a  notice  of  dishonor  given  in  due 
time  by  a  prior  indorsee,  provided  he  himself  is  in  a  condition  to  sue 
the  party  by  whom  the  notice  was  given.  Here,  Lysaght  the 
younger,  holding  the  bill  as  his  father's  agent,  duly  presented  it,  and 
had  it  returned  to  him  dishonored.  Notice  of  that  fact  to  him, 
therefore,  operating  as  notice  to  the  firm,  the  present  plaintiff  was 
entitled  to  sue  them,  and,  consequently,  is  in  a  condition  to  avail 
himself  of  the  notice  of  dishonor  given  by  them  to  the  defendant. 

I  find  the  rule  thus  laid  down  in  Byles  on  Bills  (5th  ed.,  p.  214): 
"  The  object  of  notice  is  twofold;  first,  to  apprise  the  party  to  whom 
it  is  addressed,  of  the  dishonor;  and,  secondly,  to  inform  him  that 
the  holder,  or  party  giving  the  notice,  looks  to  him  for  payment. 
{Tindal  Y.  Brown,  i  T.  R.  167.)  Hence,  it  follows  that  notice  can 
only  be  given  by  some  party  to  the  instrument,  though  he  need  not 
be  the  actual  holder  of  the  bill  at  the  time  {Chapman  v.  Keane,  3  Ad. 
&  E.  193,  4  N.  &  M.  607 ;  Harrison  v.  Ruscoe,  15  M.  &  W.  231 ;  Miers 


II.  I.J  BY    WHOM    GIVEN.  53 1 

V.  Brown,  ii  M.  &  W.  372);  but  that  a  stranger  is  incompetent  to 
give  it.  (^Stezcari  v.  Kennett,  2  Campb.  177.  Vide  tamcn  Abel  v. 
Fotts,  3  Esp.  N.  P.  C.  243.)  And  it  has  been  held  by  Lord  Eldon, 
that  notice  by  the  first  indorsee,  who  had  not  himself  received  notice 
from  the  second  indorsee,  and  who  was  not,  therefore,  obliged  to 
take  back  the  bill,  was  insufficient  as  between  the  second  indorsee 
and  the  drawer.  {Ex  Parte  Barclay,  7  Ves.  597;  but  qiicere,  since 
the  case  of  Chapman  v.  Keane,  supra.)  And  it  seems  clear,  that  even 
a  party  to  the  bill,  who  has  been  already  discharged  by  laches,  or  who 
could  not  in  any  event  sue,  is  incompetent  to  give  notice.  (^Harri- 
son X.  Ruscoe,  15  M.  &  W.  231;  Miers  v.  Broivn,  11  M.  &  W.  372.)  But 
a  prior  indorsee,  who  has  himself  received  due  notice,  may  transmit 
it.  (jyameson  v.  Stuinton,  2  Campb.  373,  2  Taunt.  224;  Wilson  v. 
Swabey,  i  Stark.  N.  P.  C.  34.)  And  notice  by  the  holder,  or  by  a 
party  who  is  liable  to  be  sued,  and  may  be  entitled  to  sue,  will  enure 
to  the  benefit  of  all  antecedent  or  subsequent  parties.  So  that  a 
notice  by  the  last  indorsee  to  the  drawer,  will  operate  as  a  notice 
from  each  indorsee  to  the  drawer;  and,  if  the  payee,  or  first  indorsee, 
has  duly  received  notice,  a  notice  by  him  to  the  drawer  will  be 
equivalent  to  a  notice  from  each  indorser,  and  from  the  holder  to 
the  drawer.  (Bayley  on  Bills,  209.)  And  a  notice  from  an  inter- 
mediate party  may,  in  pleading,  be  described  as  a  notice  from  the 
plaintiff.      {Newen  v.  Gill,  8  C.  &  P.  367.)  " 

Rule  refused.' 

'  §  161-164  [90-93].  In  Chapman  v.  Keaxe  (3  Ad.  &  £.  193 — 1S35),  A 
indorsed  the  bill  to  B,  who  left  it  with  A's  clerk.  The  clerk  presented  it,  and 
on  dishonor  notified  the  drawer  in  the  name  of  A.  A  afterwards  took  up  the 
bill  from  B,  and  brought  action  against  the  drawer.  It  was  objected  that  the 
notice  should  have  been  in  the  name  of  B  the  holder.  Held:  That  the  notice 
was  sufficient.  The  court  employed  the  sweeping  language,  which  has  since 
given  rise  to  some  misapprehension,  that  "  It  is  universally  considered  that  the 
party  entitled  as  holder  to  sue  upon  the  bill  may  avail  himself  of  notice  given 
in  due  time  by  any  party  to  it."  This  is  properly  qualified  in  the  Neg.  Inst.  L., 
i:,  161  [90]. 

In  Harrison  v.  Ruscoe,  (15  M.  &  W.  231 — 1846),  A  indorsed  the  bill  to  B 
who  left  it  with  C.  C  gave  notice  of  dishonor  to  the  drawer,  but  by  mistake 
and  without  authority,  in  the  name  of  A.  Action  by  B  against  drawer.  Held: 
Notice  by  A  would  be  good  under  doctrine  of  Chapman  v.  Keane,  (not,  how- 
ever, if  A  had  been  discharged  by  laches  or  had  no  right  of  action  on  the  bill  if 
he  had  taken  it  up);  notice  by  C  in  A's  name  is  good  since,  though  unauthor- 
ized, the  drawer  is  not  injured. 

In  Jennings  v.  Roherts,  (4  E.  &  B.  615 — 1S55),  A  indorsed  the  bill  to  defend- 
ant and  defendant  to  plaintiff.  Plaintiff  knew  the  acceptor  had  stopped 
payment,  and  probably  would  not  pay.  On  the  day  after  maturity,  without 
knowing  whether  the  bill  (which  was  payable  at  a  distance)  had  actually  been 
dishonored,  plaintiff  told  defendant  it  had  been   dishonored,  and  he  should  look 


532  NOTICE   OP^   DISHONOR.  [ART.  VIII. 

§  163  STAFFORD  v.  YATES.  [§  92] 

iS  Johnson  (N.  Y.,  327.)  —  1820. 

Action  by  second  indorser  against  first  indorser.  Defence,  want 
of  notice.     Judgment  for  plaintiff. 

The  note  was  indorsed  for  the  accommodation  of  the  maker.  It 
was  discounted  at  bank,  and  on  dishonor  at  maturity  due  notice  was 
given  by  the  agent  of  the  bank  to  both  indorsers.  No  notice  was 
given  by  plaintiff  to  defendant.      Plaintiff  took  up  the  note. 

Per  Curiam.  — We  see  no  ground  to  doubt  the  correctness  of  the 
decision  at  the  circuit.  Upon  authority,  as  well  as  sound  reason,  it  is 
sufficient  that  the  first  indorser  had  notice  from  any  subsequent 
holder  of  the  note,  of  the  default  of  the  maker,  and  that  he  would 
be  looked  to  for  payment;  provided  such  notice  were  given  imme- 
diately after  such  default.  The  only  object  in  requiring  notice  is, 
that  such  indorser  may  have  recourse  to  the  maker,  to  indemnify 
himself.  And  whether,  after  such  notice,  the  first  indorser  be 
sued  by  the  second,  or  third  indorser,  is  immaterial;  and  notice  of 
non-payment,  etc.,  from  either  of  them,  enures  to  the  benefit  of  all 
who  stand  behind  him  on  the  note. 

Judgment  for  the  plaintiff. 


§  165       OHIO  LIFE  INSURANCE  AND  TRUST  CO.  v.      [§  94] 

McCAGUE. 

18  Ohio,  54.  —  1849. 

Action  against  drawer  of  a  bill  payable  to  his  own  order  and 
indorsed  by  him  to  plaintiff  and  by  plaintiff  to  its  agent  in  New 
York.     Judgment  for  plaintiff. 

Spalding,  J. — There  are  really  but  two  questions  presented  in 
this  case  for  our  consideration:  First.  Was  the  notice  of  protest 
for  non-payment  transmitted  with  sufficient  diligence  and  directness 
to  the  defendant? 

The  bill  matured  and  went  to  protest  on  the  19th  of  June,  1846. 
It  was  then  in  the  hands  of  an  agent  of  the  plaintiff  in  the  city  of 
New  York.  Admit  that  agent  to  have  been  the  actual  cashier  of 
the  "Trust  Company."     He   was  then  attending  to  an  agency  in 


to  defendant.  Held:  Notice  sufficient.  "  If  a  bill  is  dishonored  in  fact,  and  a 
party  to  the  bill  unequivocally  asserts  that  fact  in  a  notice  of  dishonor,  I  think 
you  cannot  inquire  into  the  state  of  the  party's  mind,  or  his  means  of  knowl- 
edge." —  Ed. 


■'I. 


2- J  FUR.M    OF   NOTICE.  533 


the  city  of  New  York,  and,  so  far  as  it  concerned  the  bill  in  ques- 
tion, which  was  discounted  at  the  bank  in  Cincinnati  and  sent  to 
him  in  New  York  for  collection,  he  may  as  well  be  called  an  agent 
as  any  indifferent  person.  This  agent,  on  the  very  next  day  after 
the  protest  in  New  York,  sent  the  notice  by  mail  to  his  principal  in 
Cincinnati,  where  it  arrived  on  the  25th  of  June,  and  on  the  same 
day  was  again  placed  in  the  mail,  directed  to  the  defendant  at  Ripley. 
The  most  stringent  rules  of  the  law  merchant  will  require  no  more 
than  this.  The  whole  objection  of  counsel  is  based  upon  the  fanciful 
idea  that  the  Ohio  Life  Insurance  and  Trust  Company  at  Cincinnati, 
was  embodied  in  the  person  of  its  cashier,  Wm.  M.  Vermilye,  in  the 
city  of  New  York;  and  that  it  was  sending  the  notice  of  protest 
from  itself  in  New  York  to  itself  in  Cincinnati.  We  are  not  inclined 
to  indulge  in  subtleties  of  this  sort,  and  hold  that  Mr.  Vermilye  in 
New  York,  whether  he  be  called  agent  or  cashier,  was  employed  by 
the  holder  of  the  bill  in  Cincinnati  to  present  the  same  for  payment; 
and,  on  payment  being  refused,  to  return  it  in  due  time,  with  the 
ordinary  notice  of  protest,  to  his  employer  in  Cincinnati,  whose  duty 
it  would  be  to  communicate  with  the  other  parties  to  the  bill. 
[Omitting  a  question  of  statutory  construction.] 

Judgment  affirmed.' 


2.   Form  of  Notice. 


§  166  KING  V.  HURLEY.  [§  95] 

85  Maine,  525.  —  1893. 

Emery,  J. — This  was  an  action  by  an  indorsee  against  the 
indorser  of  a  promissory  note.  At  the  maturity  of  the  note,  pay- 
ment was  duly  demanded  of  the  maker,  and  was  refused,  and  notice 
thereof  was  seasonably  sent  to  the  defendant  indorser.  The  defend- 
ant makes  but  two  objections  to  the  notice.  First,  that  it  did  not 
state  who  were  the  other  indorsers  of  the  note.  Second,  that  it 
misstated  the  amount  of  the  note. 

'Accord:  Howard  v.  Ives,  i  Hill  (N.  Y.)  263;  Church  v.  Barlow,  9  Pick. 
(Mass.)  547;  Renshaiv  v.  Triplett,  23  Mo.  213. 

It  has  recently  been  held  by  the  English  Court  of  Appeal  (Collins,  L.  J.,  dis- 
senting), that  where  a  bill  is  forwarded  by  the  A.  Branch  of  the  X  Bank,  due 
notice  to  the  B.  Branch  of  the  same  bank  is  sufficient  to  satisfy  sec.  49  subsec. 
(12)  and  (13)  of  the  Bills  of  Exchange  Act,  since  the  X  Bank  is  the  principal, 
and  not  a  particular  branch  of  that  bank.  Fielding  S^  Co.  v.  Carry,  46  W.  R. 
97.  These  provisions  are  substantially  the  same  as  g  165  [94],  and  §  175  [104] 
of  the  Neg.  Inst.  L.  —  Ed. 


534  NOTICE    OF   DISHONOR.  [ART.  VIII. 

The  defendant,  however,  does  not  show  that  he  was  in  the  least 
misled  or  confused  by  the  omission,  or  by  the  mistake.  On  the 
contrary  it  clearly  appears  that  he  understood  the  notice  to  refer  to 
the  note  in  suit.  He  was,  therefore,  fully  informed  of  the  dishonor 
of  this  note  and  that  the  holder  looked  to  him  for  payment.  This 
was  sufficient  to  fix  his  liability.  {Cayuga  Co.  Bank  v.  Warden,  i 
N.  Y.  413;  6  N.  Y.  19.) 

Exceptions  overruled.' 


§  167  MILLS  7'.  BANK  OF  UNITED  STATES.  [§  96] 

II  Wheatox  (U.  S.),  431.  —  1S26. 

Action  against  indorser  on  a  note  dated  20  July,  1819,  payable 
60  days  after  date  at  the  office  of  discount  and  deposit  of  the  Bank 
of  the  United  States,  at  Chilicothe.  The  following  notice  of  dis- 
honor was  sent  to  the  indorser:  — 

Chilicothe,  22nd  September,  1819. 
Sir,  You  will  hereby  take  notice,  that  a  note  drawn  by  Wood  &  Ebert,  dated 
20th  day  of  September,  1S19,  for  3,600  dollars,  payable  to  )'ou,  or  order,  in  sixty 
days,  at  the  office  of  discount  and  deposit  of  the  Bank  of  the  United  States  at 
Chilicothe,  and  on  which  you  are  indorser,  has  been  protested  for  non-payment, 
and  the  holders  thereof  look  to  you. 

Yours  respectfully. 

Levin  Belt, 
Peter  Mills,  Esq.  Mayor  of  Chilicothe. 

Mr.  Justice  Story,  (after  stating  the  facts),  delivered  the  opinion 
of  the  court. 

The  first  point  is,  whether  the  notice  sent  to  the  defendant  at 
Chilicothe,  was  sufficient  to  charge  him  as  indorser.  The  Court  was 
of  opinion,  that  it  was  sufficient,  if  there  was  no  other  note  payable 
in  the  office  at  Chilicothe,  drawn  by  Wood  &  Ebert,  and  indorsed  by 
the  defendant. 

It  is  contended,  that  this  opinion  is  erroneous,  because  the  notice 
was  fatally  defective  by  reason  of  its  not  stating  who  w-as  the  holder, 
by  reason  of  its  misdescription  of  the  date  of  the  note,  and  by  reason 
of  its  not  stating  that  a  demand  had  been  made  at  the  bank  when  the 
note  was  due.  The  first  objection  proceeds  upon  a  doctrine  which 
is  not  admitted  to  be  correct;  and  no  authority  is  produced  to  sup- 
port it.  No  form  of  notice  to  an  indorser  has  been  prescribed  by 
law.  The  whole  object  of  it  is  to  inform  the  party  to  whom  it  is 
sent,  that  payment  has  been  refused  by  the  maker;   that  he  is  con- 


'  See  also  Sitsscx  Bank  v.  Bald'unn,  17  N.  J.  L.  487,  ante,  p.  501.  —  Ed. 


n.  2.]  FORM   OF   NOTICE.  535 

sidered  liable;  and  that  payment  is  expected  of  him.  It  is  of  no 
consequence  to  the  indorser  who  is  the  holder,  as  he  is  equally 
bound  by  the  notice,  whomsoever  he  may  be;  and  it  is  time  enough 
for  him  to  ascertain  the  true  title  of  the  holder,  when  he  is  called 
upon  for  payment. 

The  objection  of  misdescription  may  be  disposed  of  in  a  few 
words.  It  cannot  be  for  a  moment  maintained,  that  every  variance, 
however  immaterial,  is  fatal  to  the  notice.  It  must  be  such  a  vari- 
ance as  conveys  no  sufficient  knowledge  to  the  party  of  the  particular 
note  which  has  been  dishonored.  If  it  does  not  mislead  him,  if  it  con- 
veys to  him  the  real  fact  without  any  doubt,  the  variance  cannot  be 
material,  either  to  guard  his  rights  or  avoid  his  responsibility.  In 
the  present  case,  the  misdescription  was  merely  in  the  date.  The 
sum,  the  parties,  the  time  and  place  of  payment,  and  the  indorse- 
ment, were  truly  and  accurately  described.  The  error,  too,  was 
apparent  on  the  face  of  the  notice.  The  party  was  informed,  that 
on  the  22d  of  September,  a  note  indorsed  by  him,  payable  in  sixty 
days,  was  protested  for  non-payment;  and  yet  the  note  itself  was 
stated  to  be  dated  on  the  20th  of  the  same  month,  and,  of  course, 
only  two  days  before.  Under  these  cicumstances,  the  Court  laid 
down  a  rule  most  favorable  to  the  defendant.  It  directed  the  jury 
to  find  the  notice  good,  if  there  was  no  other  note  payable  at  the 
office  at  Chilicothe,  drawn  by  Wood  &  Ebert,  and  indorsed  by  the 
defendant.  If  there  was  no  other  note,  how  could  the  mistake  of 
date  possibly  mislead  the  defendant?  If  he  had  indorsed  but  one 
note  for  Wood  &  Ebert,  how  could  the  notice  fail  to  be  full  and 
unexceptional  in  fact? 

The  last  objection  to  the  notice  is,  that  it  does  not  state  that  pay- 
ment was  demanded  at  the  bank  when  the  note  became  due.  It  is 
certainly  not  necessary  that  the  notice  should  contain  such  a  formal 
allegation.  It  is  sufficient  that  it  states  the  fact  of  non-payment  of 
the  note,  and  that  the  holder  looks  to  the  indorser  for  indemnity. 
Whether  the  demand  was  duly  and  regularly  made,  is  matter  of  evi- 
dence to  be  established  at  the  trial.  If  it  be  not  legally  made,  no 
averment,  however  accurate,  will  help  the  case;  and  a  statement  of 
non-payment  and  notice,  is,  by  necessary  implication,  an  assertion 
of  right  by  the  holder,  founded  upon  his  having  complied  with  the 
requisitions  of  law  against  the  indorser.  In  point  of  fact,  in  com- 
mercial cities,  the  general,  if  not  universal,  jiractice  is,  not  to  state 
in  the  notice  the  mode  or  place  of  demand,  but  the  mere  naked  non- 
payment. 

Upon  the  point,  then,  of  notice,  we  think  there  is  no  error  in  the 
opinion  of  the  Circuit  Court. 


536  NOTICE   OF   DISHONOR.  [ART.  VIII. 

[The  Court  then  decides  that  a  usage  to  demand  payment  on  the 
fourth  day  of  grace,  is  good,  and  some  other  points  immaterial  here.] 

Judgment  affirmed.' 


§  167  SALOMAN?'.  PFEISTER  &  VOGEL  LEATHER  CO.  [§  96] 

31  Atlantic  Reporter  (N.  J.),  602.  —  1S95. 

Action  against  indorser.      Judgment  for  plaintiff. 

Van  Syckel,  J.  —  The  only  question  which  it  is  deemed  necessary 
to  discuss  in  this  case  is  whether  a  notice  of  protest  must  contain  an 
express  statement  that  the  holder  of  the  protested  note  will  look  to 
the  indorser  for  payment.  This  question  was  before  our  Supreme 
Court  in  Burgess  v.  Vreeland  (24  N.  J.  Law,  71),  in  which  case  there 
was  a  failure  to  state  in  the  notice  that  the  holder  looked  to  the 
indorser  for  payment.  The  chief  justice  in  deciding  the  case  said: 
"  The  object  of  the  notice  is  to  apprise  the  indorser  that  the  note 
is  dishonored,  and  that  he  is  looked  to  for  payment.  It  is  not 
necessary  to  state,  in  terms,  that  the  holder  looks  to  the  indorser  for 
indemnity.  It  is  enough  if  that  fact  appears  by  just  and  natural 
implication.  The  modern  cases  agree  that  the  fact  of  giving  notice 
to  the  indorser  that  the  note  is  dishonored  for  non-payment  is  in 
itself  a  sufficient  notice  that  the  indorser  is  looked  to  for  payment." 
Many  authorities  supporting  this  rule  are  cited  in  the  opinion.  In 
the  later  case  of  Howlatid  v.  Adrain  (30  N.  J.  Law,  41)  the  rule 
recognized  was  that  the  notice  must  be  sufficient  to  inform  the  party, 
either  in  express  terms  or  by  necessary  implication,  that  the  bill  or 
note  had  been  dishonored,  and  that  he  was  looked  to  for  payment. 
In  the  case  in  hand  the  notice  mailed  to  the  indorser  stated  that 
payment  of  the  note  had  been  duly  demanded  of  the  maker,  that  pay- 
ment was  refused,  and  that  the  note  was  protested  for  non-payment. 
The  only  inference  which  the  indorser  could  reasonably  have  drawn 
from  such  a  notice  was  that  the  holder  of  the  note  intended  to  look 
to  him  for  payment.     The  liability  of  the  maker  to  the  holder  was 


'  An  omission  or  misdescription  of  the  maker's  name  may  render  the  notice 
ineffectual.  Home  Ins.  Co.  v.  Green,  19  N.  Y.  518;  iMcGeorge  v.  Chapman,  45 
N.  I.  L.  395.  But  not,  it  seems,  if  the  indorser  is  not  misled  thereby.  Ho-u'/and 
V.  Adrain,  30  N.  J.  L.  41;   Hodges  v.  Shuler,  22  N.  Y.  114. 

Where  the  notice  may  apply  to  any  one  of  two  or  more  notes  indorsed  by  the 
defendant,  the  notice  may  be  ineffectual.  Cook  v.  Litchfield,  9  N.  Y.  279.  But 
not,  it  seems,  if  the  indorser  is  not  misled  thereby,     s.  c,  (on  retrial),  2  Bosw. 

(N.  Y.)  137. 

It  is  unnecessary  that  the  notice  should  include  a  copy  of  the  protest.  Doi- 
nistoun  v.  Stewart,  17  How.  (U.  S.)  boi^,  post.  —  En. 


II.   3-]  MODE   OF   NOTICE.  537 

fixed  without  presentment  and  protest,  and  therefore  the  only  pur- 
pose which  the  holder  could  have  had  in  sending  such  notice  was  to 
charge  the  indorser.  The  notice  in  this  case  was,  in  my  opinion, 
sufficient,  and  the  judgment  below  should  be  affirmed.* 


3.   Mode  of  Notice. 

(a)  Pcrso7ial  delivery. 

§  167  HOBBS  V.  STRAINE.  [§  96] 

149  Massachusetts,  212.  —  1SS9. 

Action  against  indorser.     Verdict  for  plaintiff. 

Morton,  C.  J.  —  Notice  of  the  dishonor  of  a  note  is  sufficient  to 
charge  an  indorser  if  it  is  delivered  to  him  personally,  or  is  left  at 
his  place  of  residence  or  of  business,  or  is  deposited  in  the  mail 
addressed  to  him  at  his  place  of  residence  or  of  business,  the  postage 
being  prepaid.  (Pub.  Sts.,  c.  77,  §  16;  Bank  of  America  v.  S/iazv^ 
142  Mass.  290;  Importers  d^  Traders  National  Bank  v.  Shaw,  144 
]\Iass.  421.)  The  underlying  principle  of  all  the  decisions  upon  the 
subject  is,  that  reasonable  diligence  must  be  used  by  the  holder  in 
getting  notice  of  the  dishonor  to  the  indorser. 

In  the  case  at  bar,  the  evidence  tended  to  show  that  the  plaintiffs, 
in  due  time,  took  a  written  notice  of  the  dishonor,  addressed  to  the 
defendant,  to  his  office,  which  was  his  place  of  business,  and,  finding 
no  one  in,  left  it  there.  The  precise  place  in  the  office  where  it  was 
left  was  not  fixed  with  certainty,  and  the  court  instructed  the  jury, 
that,  if  they  found  that  it  was  left  in  a  conspicuous  place  in  the 
office,  it  was  a  sufficient  notice.  This  ruling  was  correct.  The  jury 
might  well  find  that  the  notice  was  left  in  good  faith  in  the  defend- 
ant's office,  in  such  way  that  he  would  be  likely  to  see  it  when  he 
came  in.  Such  a  mode  of  giving  the  notice  would  ordinarily  be  as 
effectual  as  if  it  were  sent  by  mail  through  a  letter  carrier.  We 
think  the  evidence  shows  a  compliance  with  the  rule  of  law  requiring 
the  holder  to  exercise  reasonable  diligence,  and  that  the  notice  was 
sufficient  to  charge  the  defendant  as  indorser. 

[Omitting  question  as  to  waiver.] 

Exceptions  overruled.* 

'  An  indication  of  dishonor:  "  Has  not  been  paid  and  I  request  (or  demand) 
payment."  Arnold  \.  Kiuloch,  50  Barb.  (N.  Y.)  44;  Page  v.  Gilbert,  60  Me.  485; 
Armstrong  \.  Thurston,  11  Md.  148;  Pinkham  wMacy,  9  Met.  (Mass.)  I74-—  En. 

*  Notice  at  a  place  of  business  may  be  left  with  any  person  in  charge.  Bank 
V.  Mudgt'tt,   44  N.  Y.   514;  Mcrz  v.   Kaiser,   20  La.   Ann.   377.     So,   also,   as  to 


538  NOTICE   OF   DISHONOR.  [ART.  VIII. 

(/;)  Mail  delivery. 

§  167  SHELDON  V.  BENHAM.  [§  96] 

4  Hill(N.  Y.),  129.  —  1S43. 

Action  against  indorser.  Note  payable  in  Geneva.  Holder  and 
indorser  reside  in  Penn  Yan.  Note  dishonored  in  Geneva;  notices 
sent  by  mail  from  Geneva  to  holder  in  Penn  Yan;  holder  deposits 
notice  for  indorser  in  Penn  Yan  postoffice.  Indorser  asks  nonsuit  on 
the  ground  that  leaving  the  notice  in  the  postoffice  at  Penn  Yan, 
there  being  no  evidence  that  the  defendant  received  it,  was  insuffi- 
cient.     Motion  for  nonsuit  denied.     Verdict  for  plaintiff. 

By  the  Court,  Bronson,  J.  —  It  seems  to  have  been  assumed  on 
the  trial  that  Babcock  owned  the  note,  and  sent  it  to  the  bank, 
where  it  was  made  payable,  for  collection.  Notice  was  sent  to  Bab- 
cock, the  last  indorser,  with  notices  for  the  other  indorsers;  and  if 
he  was  not  mistaken  as  to  the  proper  mode  of  service,  he  gave 
notice  to  the  defendant  Benham  on  the  same  day  or  the  day  after 
he  received  advices  from  the  bank.  Either  day  was  sufficient. 
(^Howard  v.  Ives,  i  Hill,  263;  Bank  v.  Davis,  2  id.  451.)  But  as 
Babcock  and  the  defendant  Benham  both  lived  in  the  same  village, 
I  think  the  service  should  have  been  personal,  or  by  leaving  the 
notice  at  the  dwelling  house  or  place  of  business  of  the  indorser, 
and  that  service  through  the  postoffice  was  not  sufficient.  The  post- 
office  is  not  a  place  of  deposit  for  notices  to  indorsers,  except  where 
the  notice  is  to  be  transmitted  by  mail  to  another  office.  {Ranso/ii 
v.  Maek,  2  Hill,  587.)     None  of  our  cases  have  gone  further  than 

that. 

New  trial  granted.' 


notice  at  the  residence  of  the  indorser.  U.  S.  Bank  v.  Hatch,  6  Pet.  (U.  S.) 
250;  Blakely  v.  Grant,  6  Mass.  386;  Bradley  v.  Davis,  26  Me.  45;  I/oTve  v.  Brad- 
ley,  19  Me.  31.  Notice  by  telephone  to  be  effective  must  be  shown  to  have  actu- 
ally reached  the  indorser.  Usually  it  would  be  necessary  to  show  that  the 
person  responding  was  the  indorser  himself.  Tho7npson,  etc.,  Co.  v.  Appleby 
(Kan.  App.)  48  Pac.  Rep.  933.  See  also  Stezaart  v.  Eden,  2  Caines  (N.  Y.)  121, 
post,  p.  540;  Adams  v.   Wright,  14  Wis.  i\.o^,  post, —  Ed 

'  Notice  by  Mail.  In  the  absence  of  statute  the  mail  cannot  be  used  as  a 
place  of  deposit  but  only  as  a  means  of  transmission.  Van  Vechten  v.  Prnyn, 
13  N.  Y.  549.  This  rule  was  changed  by  statute  in  New  York  by  L.  1857, 
c.  416;  but  the  statute  does  not  abridge  the  right  of  the  indorser  to  designate 
the  particular  address  to  which  the  notice  shall  be  sent.  Bartlett  v.  Rooinson,  39 
N.  Y.  187  (1868).  Independent  of  statute  it  has  been  held  that  where  the 
indorser  resides  outside  the  corporate  limits  of  the  town  where  the  instrument 
is  dishonored  and  is  in  the  habit  of  receiving  his  mail  there,  the  post-office  may 
be  used  as  a  place  of  deposit  in  order  to  relieve  the  holder  of  the  burden  and 


II.  3.]  MODE    OF   NOTICE.  539 

§  177  PEARCE  V.  LAXGFIT.  [§  106] 

loi  Pennsylvania  State,  507.  —  1SS2. 

Action  against  indorser.  Holder  handed  notice  duly  addressed 
and  stamped  to  a  United  States  mail  carrier  who  was  then  in  the 
bank  to  deliver  mail.     Judgment  for  plaintiff. 

Mr.  Justice  Green  delivered  the  opinion  of  the  court,  December 
30th,  1882. 

We  think  the  delivery  of  a  letter  to  an  official  letter  carrier  is  the 
full  equivalent  for  depositing  it  in  a  receiving  box  or  at  the  post- 
ofhce.  When  left  in  the  former  it  is  for  the  purpose  of  being  taken 
therefrom  by  the  carrier,  and  if  left  at  the  post-office  it  must  be 
taken  from  the  receptacle  there  provided  for  its  deposit,  either  by 
the  postmaster  or  by  some  one  of  his  agents,  to  be  placed  in  the  mail. 
li.  either  case  the  letter  must  come  into  the  personal  custody  of 
some  one  lawfully  authorized  for  the  purpose,  whose  function  it  is 
to  participate  in  the  transmission  of  it  from  the  sender  to  the  mail. 

It  certainly  can  make  no  difference  whether  the  letter  is  handed 
directly  to  the  carrier,  or  is  first  deposited  in  a  receiving  box  and 
taken  from  thence,  by  the  same  carrier.  In  the  case  of  Skilbeck  v. 
Garbett  (7  Ad.  &  El.  N.  S.,  p.  846),  in  which  the  very  point  was 
decided,  Lord  Denman,  C.  J.,  said:  "  If  a  public  servant  belong- 
ing to  the  post-office,  takes  charge  of  the  letter  in  the  exercise  of  his 
public  duty,  it  is  the  same  as  if  it  were  carried  to  the  office."  The 
postal  regulations  of  the  United  States  require  that  carriers  while 
on  their  rounds  shall  receive  all  letters  prepaid  that  may  be  handed 
to  them  for  mailing.  It  follows  that  when  such  a  carrier  receives  a 
prepaid  letter  from  a  citizen  for  the  purpose  of  being  mailed,  he  is 
in  the  strict  performance  of  his  official  duty. 

[Omitting  other  questions.] 

'-  Judgment  affirmed.' 

expense  of  sending  a  messenger.  Bank  of  Columbia  v.  Laiorcnce,  i  Pet.  (U.  S.) 
57S  (1828);  Barret  v.  Evans,  28  Mo.  331;  Bell  v.  State  Bank,  7  Blackf.  (Ind.) 
456-  but  the  contrary  has  also  been  maintained.  Forbes  v.  Oviaha  Nat.  Bk.,  ro 
Neb.  338  (1880);  Bro'cvn  v.  Bank  of  Abingdon,  85  Va.  95  (1888).  If  such  notice 
is  actually  received  in  due  time  it  is  unquestionably  good.  Phelps  v.  Stocking, 
21  Neb  443  (1887).  Where  there  is  a  letter  carrier  delivery  at  offices  and  resi- 
dences the  mail  may  be  used  though  the  indorser  reside  in  the  place  where  the 
instrument  is  dishonored,  for  in  such  case  the  mail  is  used  for  transmission  and 
not  for  deposit.  Shoemaker  v.  Mechanics'  Bank,  59  Pa.  St.  83  (1868);  Walters  v. 
Broivn  15  Md.  285  (1859);  but  in  such  case  a  deposit  of  a  notice  not  addressed 
to  a  street  and  number  has  been  held  not  within  the  rule.  Benedict  v.  Sclimwg^ 
13  Wash.  476  (1896).  By  the  statute  above,  notice  by  deposit  is  now  sufficient. 
See  S  174  [103],  subsec.  3,  post.  —  Ed. 

"'The  deposit  of  the   notice  in  a  postoffice  box  on  the  street  was  just  the 


540  NOTICE   OF   DISHONOR.  [ART.  VIII. 

4.   To  Whom  Notice  May  Be  Given. 

§  169  STEWART  V.  EDEN.  [§  98] 

2  Caines  (N,  Y.),  121.  —1804. 

Action  against  executor  of  indorser.  Shortly  after  the  note  was 
indorsed  the  indorser  removed  to  his  country  residence  and  there 
died.  His  will  was  not  proved  until  after  the  maturity  of  the  note. 
At  its  maturity  the  holder,  upon  dishonor,  sent  a  messenger  with  a 
notice  of  dishonor,  directed  to  the  indorser,  to  the  town  house  of 
the  indorser,  but,  as  it  was  closed,  the  notice  was  rolled  up  and 
put  into  the  keyhole  of  the  door. 

Livingston,  J.,  delivered  the  opinion  of  the  court. 

Ought  notice  of  the  maker's  default  to  have  been  sent  to  the 
indorser's  country  house?  The  note  bemg  dated  in  New  York,  the 
maker  and  indorser  are  presumed  to  have  resided,  and  contemplated 
payment,  there.  It  is  admitted,  indeed,  that  the  indorser  did  reside 
in  the  city  at  the  time  of  its  date,  for  it  is  stated  that  shortly  there- 
after he  went  to  his  country  seat,  shutting  up  his  house  in  town. 
We  must  take  care  that,  while  proper  diligence  be  imposed  on  the 
holder  of  negotiable  paper,  we  do  not  exact  from  him  every  possible 
exertion  that  might  have  been  made  to  affect  an  indorser  with 
knowledge  of  its  being  dishonored.  If  he  has  done  all  that  a  dili- 
gent and  prudent  man  could  naturally  and  fairly  do  under  like  cir- 
cumstances; if  the  law  has  prescribed  no  certain  way  of  sending  a 
notice  in  the  given  case;  if  the  indorser's  own  conduct  has  rendered 
it  somewhat  difficult  to  determine  in  what  way  the  notice  ought  to 
be  given;  and  especially,  if  from  what  has  been  done,  it  may  reason- 
ably be  presumed  that  notice  has  reached  the  parties  concerned,  we 
should  be  satisfied,  and  not  ask  for  more.  Indorsers,  therefore, 
cannot  complain,  if  notices  of  this  nature  are  permitted  to  be  left  at 
their  houses  in  town  notwithstanding  their  removal  into  the  couiitr}' 
during  the  hot  months.  It  is  more  reasonable  that  they  leave  a 
person  in  town  to  attend  to  their  business,  than  that  the  holders  of 

same,  in  legal  effect,  as  if  il  had  been  deposited  in  a  box  at  the  postoffice. 
{Skilbeck  v.  Garbett,  7  Q.  B.  S46;  Pearccx.  Langfit,  lOi  Penn.  St.  507)." — John- 
son V.  Brown,  154  Mass.  105  (1891).  Accord:  Casco  Nat.  Bk.  v.  Sha7o,  79  Me. 
376;    Wood  V.  Callaghan,  61  Mich.  402. 

The  notarial  certificate  need  not  state  that  the  address  to  which  the  notice  is 
sent  is  the  correct  residence  or  address.  In  the  absence  of  evidence  to  the  con- 
trary, the  presumption  is  that  the  notary,  who  is  a  public  officer,  has  correctly 
stated  the  address.  Leggv.  F/wr?/,  165  Mass.  555,  citing  contrary  holdings.  As  to 
sufficiency  of  notarial  certificate  as  evidence  of  notice,  see  post,  pp.  568-570.  —  Ed. 


II.  4-]  TO   WHOM    GIVEN.  54I 

their  paper  be  put  to  the  trouble  of  finding  out  to  what  part  of  the 
country  they  have  removed  and  sending  after  them.  It  is  also 
probable,  especially  when  the  distance  between  the  two  houses  is 
only  four  miles,  as  it  was  here,  that  some  communication  will  be  kept 
up  between  them,  and  that  a  letter  left  at  the  dwelling  in  town  will 
not  be  long  in  finding  its  way  to  the  country.  I  speak  now  of  a 
temporary  residence  in  the  country;  for  a  permanent  removal  from 
the  city  might  render  a  different  course  necessary.  Nor  was  it  fatal 
to  direct  the  notice  to  the  indorser  himself;  for  as  it  was  not  known 
whether  he  had  made  a  will,  nor  who  his  executors  were,  until  long 
after,  it  was  full  as  probable  that  it  would  reach  the  parties  interested 
by  this  address  as  by  any  other;  some  one  of  the  deceased's  family 
would  either  open  it,  or  see  it  safely  delivered  to  an  executor.  The 
notice,  therefore,  was  well  served,  and  its  address  proper.' 

[Reversed  on  a  point  of  pleading.] 


§  170  DABNEY  V.  STIDGER.  [§  99] 

12  Mississippi,  749.  —  1S40. 

Action  against  administrator  of  indorser.  Indorsement  by 
Thomas  &  Dabney,  partners.  Notice  to  Thomas,  surviving  partner. 
Holder  knew  of  Dabney's  death  and  that  the  partnership  was  thereby 
dissolved.     Judgment  for  plaintiff. 

Mr.  Justice  Turner,  delivered  the  opinion  of  the  court. 

The  only  question  raised  in  this  case  is  whether  the  executor  or 
administrator  of  a  deceased  partner  is  entitled  to  notice  of  the  non- 
payment of  a  note  indorsed  by  the  partners  as  such. 

The  authorities  are  clear,  and  are  believed  to  be  uniform,  that 
notice  to  one  is  notice  to  all.  (Bayley  on  Bills,  2S5  ;  i  Con.  R.  36S; 
4  Cow.  126;  6  Louisiana,  684;  3  Litt.  251.)'    But  it  must  appear  that 

'  "  When  the  indorser  is  dead  and  there  are  no  personal  representatives,  or 
none  can  be  discovered  by  reasonable  diligence,  then  notice  of  dishonor  should 
be  addressed  to  the  indorser  at  his  last  place  of  abode.  {Stewart  v.  Eden,  2  Cai. 
121;  Merchants'  Bank  v.  Birch,  17  Johns.  25;  Linderman' s  Executors  \ .  Guldin, 
34  Pa.  St.  54;  Edvv.  Bills  &  N.  631;  Dan.  Neg.  Inst.,  §  looi.)  But  when  there 
are  personal  representatives  and  they  are  known  or  discoverable  by  due  dili- 
gence, then  notice  must  be  given  to  them.  {Oriental  Bank  v.  Blake,  22  Pick. 
206;  Smalley  v.  Wright,  II  Vroom.  471;  Story,  Prom.  N.,  §  310;  Edw.  Bills  & 
N.  631;  Dan.  Neg.  Inst.,  §  1000;  Chit.  Bills,  2()S)- "— -Dodson  v.  Taylor,  56 
N.  J.  L.  II,  19.— Ed. 

'Accord:  Hubbard  v.  Matthe^us,  54  N.  Y.  43;  Fourth  X.  B.  v.  Hcuschen,  52 
?!  ^.  207.  —  Ed. 


542 


NOTICE    OF   DISHONOR.  [ART.  VIII. 


they  are  partners.  In  this  case  it  so  appears.  Persons  being  joint 
payees  of  a  note,  who  severally  indorse  it,  are  entitled  each  to  notice 
of  non-payment.'  They  being  joint,  does  not  necessarily  constitute 
them  partners.  The  act  of  assembly  relied  on  by  the  appellant, 
found  in  Statute  Laws  of  Mississippi,  H.  &  H.,  595,  merely  affects 
the  remedy  and  not  the  right,  and  was  passed  to  facilitate  creditors 
in  obtaining  judgment  for  their  just  demands  against  one  or  all  of 
several  partners.' 


5.   Time  Within  Which  Notice  Must  Be  Given. 
(rt)    Where  parties  reside  in  the  same  place. 

§  174  SIMPSON  V.  TURNEY.  [§  103] 

5  Humphrey  (Tenn.),  419.  —  1S44. 

Reese,  J.,  delivered  the  opinion  of  the  court. 

The  Branch  Bank  of  the  State  of  Tennessee  was  the  holder  of  a 
promissory  note,  payable  at  said  bank,  made  by  James  H.  Jenkins, 
to  Anthony  Dibrell,  and  indorsed  in  the  following  order:  A.  Dibrell, 
S.  Turney,  and  Jno.  W.  Simpson.  Turney's  residence  is  within  one 
mile  of  the  bank,  at  Sparta,  so  known  to  be  to  the  bank,  and  to  all 
the  other  parties  to  the  note.  The  note  was  legally  due  on  the  ist 
day  of  February,  1843,  that  being  the  third  day  of  grace.  It  was 
on  that  day  protested.  On  the  second  day  of  February  no  notice  of 
the  protest  for  the  non-payment  of  the  note  was  either  served  on 
Turney  personally  or  left  at  his  residence.  He  had  notice  from  the 
bank,  the  holder,  on  the  3d  day  of  February.  John  W.  Simpson, 
the  plaintiff,  the  immediate  indorsee  of  Turney,  gave  him  no  notice 
whatever. 

These  facts  being  specially  found  by  the  jury  in  the  case,  the 
Circuit  Court  gave  judgment  for  Turney,  and  the  plaintiff  has 
appealed  in  error  to  this  court. 

It  is  not  insisted  for  the  plaintiff  here  that  the  notice  of  the  bank 
to  Turney,  the  only  notice  he  received,  was  in  time.  But  it  is 
urged,  that  if  Simpson  had  given  him  notice  on  the  day  he  received 

'Accord:     Willis  v.    Green,    5    Hill   (N.  Y.)232;    Shepard  \ .  Hazvlcy,    1    Conn. 

367.  —  Ed. 

'>■  If  notice  is  given  to  a  bankrupt  before  a  trustee  or  assignee  is  appointed  it 
must,  of  course,  be  given  to  him  personally.  Ex  parte  Moline,  19  Ves.  216.  If 
given  after  the  appointment  of  the  trustee  it  may  be  given  to  the  bankrupt 
or  to  the  trustee.  In  re  Bellman,  L.  R.  4  Ch.  D.  795;  Callahan  v.  Kentucky 
Bank,  82   Ky.  231;   American  X.  B.  v.  Junk  Bros.,  94  Ky.  624, /(',f/,  p.  563.  —  Ed. 


II.  5.]  WITHIN   WHAT   TIME.  543 

notice  from  the  bank,  such  notice  would  have  been  good;  and  that 
is  certainly  so;  and  the  plaintiff  further  insists  that  the  notice  given 
by  the  bank  shall  inure  to  his  benefit.  If  the  notice  had  been  in 
time  and  valid,  it  would  by  law  have  inured  to  his  benefit,  he  being 
an  intermediate  party.  But  a  notice  of  no  benefit  to  the  bank,  because 
not  fixing  the  liability  of  the  party  notified  cannot  inure  to  the 
benefit  of  another.  So  to  hold  would  be  to  introduce  a  new  princi- 
ple into  the  law  merchant.  Suppose  there  were  ten  indorsers  upon 
a  note;  if  the  holder,  ten  days  after  the  protest,  gave  notice  to  the 
first  indorser,  this,  according  to  the  argument,  would  fi.K  all  the 
indorsers,  for  it  would  be  just  the  time  necessary  to  them  to  have 
given  notice  to  each  other  successively. 

It  is  perhaps  a  universal  principle,  where  substitution  exists  at  all, 
that  the  matter  or  thing  to  be  substituted  to  must  be  valid  and 
effective  in  behalf  of  the  principal;  if  it  be  ineffectual  in  his  behalf, 
it  is  difficult  to  see  how  it  can  inure  to  the  benefit  of  others. 

Upon  the  direct  question  raised  in  this  case,  Bayley  on  Bills 
expressly  says:  "  Nor  is  it  any  excuse  that  there  are  several  inter- 
vening parties  between  him  who  gives  the  notice  and  the  defendant 
to  whom  it  is  given;  and  if  the  notice  had  been  communicated 
through  those  intervening  parties,  and  each  had  taken  the  time  the 
law  allows,  the  defendant  would  not  have  had  the  notice  the  sooner." 
The  same  principle  is  also  decided  in  the  case  of  Turner  v.  Leech 
(4  Barnwall  &  Alderson,  454-) 

We  have  been  referred  by  the  plaintiff,  to  what  has  been  said  by 
this  court  in  the  case  of  McNeil  v.  Wyatt  (3  Humphreys,  128).  The 
bank  at  Lagrange  in  that  case  gave  notice  to  one  Glover  on  the  14th 
to  be  served  on  Wyatt  &  McNeil.  Wyatt  was  served  on  the  14th, 
and  McNeil  on  the  15th.  But  Glover  proved  in  the  Circuit  Court 
that  he  was  the  general  agent  of  Wyatt  to  serve  notices  for  him 
when  his  name  was  on  paper.  And  the  Circuit  Court  left  it  to  the 
jury  to  say  whether  Glover,  who  served  the  notice,  was  not  Wyatt's 
agent  as  well  as  the  agent  of  the  bank;  and  if  he  was,  then  the 
notice  to  McNeil  on  the  15th,  one  day  after  Wyatt  received  notice, 
was  sufficient. 

This  court  held  that  there  was  not  any  error  in  this  part  of  the 
charge;  and  placing  the  validity  of  the  notice,  as  this  court  did, 
upon  that  special  ground,  is  a  distinct  recognition  of  the  general 
principle  maintained  by  us  in  this  case. 

Upon  the  whole,  we  affirm  the  judgment.' 

1  Accord:   Rowc  v.  Tipper,  13  C.  B.  249. 

Hours  OK  Service. — "  It  is  very  generally  said  in  the  books,  and  the  doctrine 
is  laid   down  without  any   apparent   limit   or   qualification,  that   the   service   by 


544  NOTICE    OF   DISHONOR.  [ART.  VIII. 

{b)    Where  parties  reside  in  different  places 

§  173  LINDENBERGER  v.  BEALL.  [§  102] 

6  Wheaton  (U.  S.),  104.  — 1821. 

Action  against  indorser.  Evidence  that  on  last  day  of  grace  the 
notice  to  the  indorser  was  put  into  the  post-office  properly  addressed, 
etc.  The  court  held  the  proof  of  notice  insufficient.  Plaintiff 
brings  error. 

The  court  were  unanimously  of  opinion,  that  after  the  demand  of 
the  maker  on  the  third  day  of  grace,  notice  to  the  indorser  on  the 
same  day  was  sufficient,  by  the  general  law  merchant;  '  and  that  evi- 
dence of  the  letter  containing  notice  having  been  put  into  the  post- 
office,  directed  to  the  defendant,  at  his  place  of  residence,  was 
sufficient  proof  of  the  notice  to  be  left  to  the  jury,  and  that  it  was 
unnecessary  to  give  notice  to  the  defendant  to  produce  the  letter 
before  such  evidence  could  be  admitted. 

Judgment  reversed. 

leaving  the  notice  at  the  dwelling-house  or  place  of  business,  is  equivalent  to  a 
personal  delivery  to  the  party  to  be  notified.  .  .  .  Service  at  the  place  of 
business  must  be  during  business  hours,  but  service  at  the  residence  is  not  so 
regulated.  It  will  be  sufficient  if  made  during  any  of  the  hours  when  members 
of  households  are  attending  to  their  ordinary  affairs.  But  these  particulars  of 
service  need  not  be  stated  in  the  certificate.  It  will  be  sufficient  if  it  shows 
service  at  the  residence  or  place  of  business,  which  constitutes  legal  diligence, 
and  the  special  circumstances  will  be  presumed  unless  the  contrary  is  shown." 
Adams  v.  Wright,  14  Wis.  408  (1861).  But  if  the  notice  is  in  fact  personal,  it 
seems  that  it  need  not  be  during  business  hours  although  delivered  at  a  place 
of  business.  Bonner  v.  A'cio  Orleans,  1  Woods  (U.  S.  C.  C.)  135  (1S75);  s.  C, 
3  Fed.  Cas.  853. 

Use  of  Post.  —  Prior  to  the  statute  it  was  held  that  where  there  are  success- 
ive indorsers  and  the  holder  sends  notice  to  the  last  indorser  by  mail  inclosing 
therewith  notices  to  prior  indorsers,  the  last  indorser  may  use  the  post-office  as 
a  place  of  deposit  for  the  notices  to  the  prior  indorsers  who  live  in  the  same 
town  as  he.  (But  see  Sheldon  v,  Benham,  4  Hill,  129,  ante,  p.  538.)  Under  this 
rule,  it  is  held  that  such  redeposit  must  be  in  time  to  reach  the  prior  indorser 
in  the  usual  course  on  the  day  following  the  day  of  receipt.  Thus,  if  the  last 
indorser  receives  the  notices  on  the  loth,  they  must  be  redeposited  in  season  to 
reach  the  prior  indorsers  in  the  usual  course  on  the  nth.  If  deposited  on  the 
nth  too  late  to  reach  the  prior  indorsers  on  that  day,  the  indorsers  are  dis- 
charged. Shelburne  Falls  Nat.  Bk.  v.  Townsley,  I02  Mass.  177;  s.  c,  107  Mass. 
444.  It  is  this  rule,  established  for  the  exceptional  case  where  drop  letters 
were  permitted  independent  of  statute,  that  is  now  extended  to  the  use  of  drop 
letters  generally  under  the  statute.  — Ed. 

'Accord:  Ex  parte  Moliiie,  19  Ves.  216;  2  Daniel  on  Neg.  Inst.,§  1036.  —  Ed. 


II.  5. J  WITHIN    WHAT   TIME.  545 

§  175  SMITH  2'.  POILLON.  [§  104] 

87  New  York,  590.  — 1882. 

Action  against  indorser.  The  holder  notified  the  third  indorser 
by  mail  and  inclosed  notices  for  the  second  and  first  indorsers.  The 
third  indorser  notified  the  second  indorser  and  inclosed  notice  for 
the  first.  The  second  indorser  received  notice  on  the  6th  and  mailed 
notice  to  the  first  indorsers  on  the  7th,  in  time  for  the  second  mail  of 
the  day  closing  at  1:30  p.  m.  The  first  mail  of  the  day  closed  at 
9:30  A.  M.  The  first  indorsers  (defendants)  contend  that  they  were 
not  notified  with  due  diligence.     Judgment  for  plaintiff. 

Earl,  J.  [After  deciding  that  the  presentment  and  prior  notices 
were  sufficient.] 

Smith  was  an  aged  man,  upward  of  eighty  years  old.  On  the 
morning  of  March  7  he  took  the  notices  for  the  defendants  and 
drove  to  Thomaston,  for  the  purpose  of  consulting  his  counsel,  and 
there  under  the  advice  of  his  counsel,  he  wrote  a  letter  addressed 
to  the  defendants,  and  inclosed  it  with  the  notice  for  the  defendants 
in  an  envelope  addressed  to  them,  and  caused  it  to  be  mailed  at 
Thomaston,  in  time  for  the  mail  which  left  there  for  New  York,  the 
residence  of  the  defendants,  at  1 140  p.  m.  That  mail  passed  through 
Warren,  on  its  way  to  New  York,  at  2  p.  m.  There  were  two  mails 
each  day  from  Warren,  one  closing  at  about  9:30  a.  m.,  and  the 
other  at  about  1 130  p.  M.,  and  that  letter  went  in  the  same  mail  that 
closed  at  Warren  at  i  :3o.  The  contention  on  the  part  of  the 
defendants  is,  that  the  law  required  that  that  notice  should  have  been 
mailed  by  the  first  convenient,  practical  mail  on  the  7th,  and  hence 
that  it  should  have  been  mailed  by  the  first  mail  on  that  day;  and, 
to  sustain  their  contention,  our  attention  is  called  to  various 
authorities.  (Smedes  v.  Ufua  Bank,  20  Johns.  372;  Afi'ad  v.  £n£^s, 
5  Cow.  303;  Sewall  v.  Russell,  3  Wend.  276;  Howards.  Ives,  i  Hill, 
263;  Haskell  V.  Boardman,  8  Allen,  38;  Sussex  Bank  v.  Baldwin,  2 
Harrison  (N.  J.),  487;  Burgess  v.  Vreeland,  24  N.  J.  L.  71;  Lawson 
V.  Partners'  Bk.,  i  Ohio  St.  206;  Freevians'  Bank  v.  Perkins,  18  Me. 
292.)  These  authorities,  while  not  entirely  harmonious,  undoubtedly 
tend  to  sustain  the  rule  that  the  notice  must  be  sent  on  the  next  day 
by  the  first  practical  and  convenient  post. 

The  counsel  for  the  plaintiff,  however,  contends  that  the  rule  is, 
that  notice  of  dishonor  in  such  cases  may  be  sent  to  the  prior  party 
by  any  post  of  the  next  day,  and  he  calls  our  attention  to  several 
authorities  which  tend  to  sustain  his  contention.  {Chick  v.  Pillsbury, 
24  Me.  458;    Whihi'cll  v.  Johnson,  17  Mass.  449;  2   Daniels  on  Neg. 

NEGOT.  INSTRUMENTS  —  35. 


546  NOTICE   OF   DISHONOR.  [ART.  VIII. 

Inst.    87;  Story  on  Bills,  §   288;  Story  on  Prom.    Notes,   §  324;  3 
Kent's  Com.  106.) 

From  a  careful  examination  of  all  these  authorities  and  many 
others  it  is  clear  that  the  law  is  not  precisely  settled.  It  appears 
that  at  first  it  was  supposed  to  be  necessary  that  notice  of  dishonor 
should  be  given  by  the  next  post  after  dishonor,  on  the  same  day,  if 
there  was  one.  That  rule  was  found  inconveniently  stringent,  and 
then  it  was  held  that  when  the  parties  lived  in  different  places, 
between  which  there  was  a  mail,  the  notice  could  be  posted  the  next 
day  after  the  dishonor  or  notice  of  dishonor.  Some  of  the  authori- 
ties hold  that  the  party  required  to  give  the  notice  may  have  the 
whole  of  the  next  day.  Some  of  them  hold  that  when  there  are 
several  mails  on  the  next  day,  it  is  sufficient  to  send  the  notice  by 
any  post  of  that  day.  Other  authorities  lay  down  the  rule,  in  gen- 
eral terms,  that  the  notice  must  be  posted  by  the  first  practical  and 
convenient  mail  of  the  next  day;  and  that  rule  seems  to  be  supported 
by  the  most  authority  in  this  State.  What  is  a  convenient  and 
practical  mail  depends  upon  circumstances.  It  may  be  controlled 
by  the  usages  of  business  and  the  customs  of  the  people  at  the  place 
of  mailing,  and  the  condition,  situation  and  business  engagements 
of  the  person  required  to  give  the  notice.  The  rule  should  have  a 
reasonable  application  in  every  case,  and  whether  sufficient  diligence 
has  been  used  to  mail  the  notice,  the  facts  being  undisputed,  is  a 
question  of  law. 

In  Mead  V.  Engs  (5  Cow.  303),  notices  of  dishonor  of  a  bill  reached 
the  post-office  at  the  residence  of  the  last  indorser  at  5  p.  m.,  and 
actually  came  to  his  hands  the  next  morning.  The  first  mail 
thereafter  for  the  residence  of  the  prior  party  left  at  i  p.  m.,  but  the 
notices  for  that  party  were  not  mailed  until  after  that  hour.  Suther- 
land, J.,  said  :  "  The  cashier  was  not  bound  in  the  exercise  of  due 
diligence  to  have  prepared  and  forwarded  notices  by  the  one  o'clock 
mail;  it  is  not  reasonable  to  demand  from  him  the  neglect  of  his 
other  official  duties  to  prepare  his  letters  and  notices  during  the 
usual  banking  hours;  "  and  further,  that  "  the  law  does  not  require 
the  holder  of  a  bill  or  note  to  give  the  earliest  possible  notice  of  its 
dishonor;  it  requires  of  him  only  an  ordinary  and  reasonable  dili- 
gence; nor  is  he  bound,  the  moment  he  receives  notice  of  the  dishonor 
of  a  bill,  to  lay  side  all  other  business  and  dispatch  notice  to  the 
prior  parties  to  the  bill ;  if  reasonable  diligence  is  used  it  is  sufficient. " 
In  Darbishire  v.  Parker  (6  East,  3),  Lord  Ellenborough  observes: 
"  There  must  be  some  reasonable  time  allowed  for  giving  notice, 
and  that,  too,  accommodating  itself  to  other  business  and  affairs  of 
life;  otherwise  it  is  saying  that  a  man  who  has  bill  transactions  pass- 


II.  5- J  WITHIN    WHAT   TIME.  547 

ing   through   his  hands  must  be   nailed   to   the  post-office,  and  can 
attend  to  no  other  business,  however  urgent,  till  this  is  dispatched." 

It  does  not  appear  here  how  far  Mr.  Smith  lived  from  the  post- 
office  at  Warren;  he  was  an  aged  man  and  wanted  some  advice  about 
the  matter.  Early  on  the  day  after  he  received  the  notices,  he  went 
to  Thomaston  to  see  his  counsel,  and  thus  he  missed  the  mail,  which 
closed  at  9:30.  We  think  it  cannot  be  said  that  the  delay  was 
unreasonable,  or  that  there  was  the  absence  of  that  proper  diligence 
which  the  law  requires.  There  was,  therefore,  no  error  in  holding 
as  matter  of  law  that  due  diligence  was  used  by  Smith  in  posting  the 
notice  to  the  defendants. 

The  judgment  should  be  affirmed,  with  costs. 

All  concur.     Judgment  affirmed.' 


§  175  STAINBACK  v.  BANK  OF  VIRGINIA.  [§  104] 

II   Grattan  (Va.),  26q.  —  1854. 

Action  against  indorser  of  bill  drawn  on  a  drawee  in  London  and 
protested  for  non-acceptance  on  April  sth.''  Notice  was  sent  in  a 
mail  leaving  Liverpool  on  April  19th  by  a  Cunard  steamship,  that 
being  the  first  steamship  leaving  England  for  the  United  States  after 
the  dishonor  of  the  bill.  But  between  the  5th  and  the  19th  several 
sailing  packets  carrying  mails  left  England  for  the  United  States. 
It  was  the  usage  of  the  London  post-office  to  forward  all  mail  by  the 
Cunard  line  unless  specially  directed  to  be  forwarded  by  other 
vessels.      Judgment  for  plaintiff. 

Samuels,  J.  .  .  .  The  law  requires  notice  of  dishonor  of  com- 
mercial paper  to  be  transmitted  to  the  parties  thereto  for  the  pur- 

'  A  mail  which  closes  at  9:10  a.  m.,  being  the  only  mail  of  the  day  after  the 
day  of  dishonor,  is  not  at  an  unreasonable  or  inconvenient  hour.  Lawson  v. 
Fanners'  Bank,  1  Oh.  St.  206  (1853).  Six  A.  M.  is  an  inconvenient  hour.  Chick 
V.  Pillsbury,  24  Me.  458  (1844).  "  The  next  day  is  early  enough;  and  if  there 
should  be  two  mails  a  day,  whether  the  notice  goes  by  the  first  or  the  second  of 
those  mails,  we  think  is  immaterial,  provided  it  was  put  into  the  post-office  early 
enough  to  go  by  a  mail  of  that  day."  —  l-Vhitwell  w.  Johnson,  17  Mass.  449 
(1821).  The  second  day  after  dishonor  is  too  late  unless  the  mail  of  the  first 
day  after  closes  before  business  hours.  Bank  v.  Bradley,  117  N.  C.  526.  If 
the  day  after  dishonor  is  a  holiday  or  Sunday,  it  is  excluded  ^rom  the  computa- 
tion. See  Neg.  Inst.  L.,  §  5  [General  Provisions].  It  has  been  held  that  a 
notice  given  on  Sunday  is  ineffective.  Kheeni  v.  Carlisle  Deposit  Bank,  76  Pa. 
St.  132.  But  not  one  given  on  a  holiday.  Deblieux  v.  Billiard,  i  Rob.  (La.) 
66.  —  Ed. 

«  See  Neg.  Inst.  L.,  g  260  [152].  —  Ed. 


548  NOTICE    OF    DISHONOR.  [ART.  VIII. 

pose  of  enabling  them  to  do  what  is  needful  to  protect  their  interests; 
to  this  end  it  may  be  important  to  have  early  notice,  and  the  law 
requires  it  to  be  given.  In  the  case  before  us  the  notice  was  sent 
in  a  mode  which  would  bring  it  to  the  hands  of  the  plaintiff  in  error 
at  the  earliest  practicable  day.  Yet  it  is  alleged  that  it  should  have 
been  sent  by  another  mode,  which,  although  it  might  have  com- 
menced the  transmission  at  an  earlier  day,  yet  would  not  have 
delivered  it  so  soon  as  the  mode  adopted.  If  we  could  yield  to  the 
arguments  of  the  plaintiff's  counsel,  we  should  sacrifice  the  object  of 
the  law.  The  notice  was  transmitted  in  the  mail  by  an  ocean 
steamer  belonging  to  the  Cunard  line,  which  hne  carried  the  mail 
from  Great  Britain  to  the  United  States.  It  was  sent  by  the  first 
steamer  which  started  after  the  bill  was  dishonored.  This  brings 
the  case  within  the  stringent  rule  of  requiring  that  the  notice  be  sent 
by  the  first  mail.  It  appears,  however,  that  there  are  regular  lines 
of  sailing  packets  from  London  (the  place  of  the  drawee's  residence) 
to  the  United  States;  that  these  packets  carried  letter  bags  made 
up  at  the  London  post-office;  and  that  the  times  for  their  sailing  from 
Great  Britain  occurred  between  the  day  of  the  dishonor  of  this  bill 
and  the  day  of  the  steamer's  leaving.  It  further  appears,  that 
although  a  sailing  packet  should  leave  on  the  regular  day  for  her 
departure,  and  thereafter  a  steamer  should  leave  on  her  regular  day 
of  departure,  the  steamer  would  probably  arrive  first  in  the  United 
States.  It  further  appears,  that  the  line  of  mail  steamers  is  used  by 
a  very  large  majority  of  business  men  for  the  transmission  of  letters 
from  Great  Britain  to  the  United  States.  There  can  be  no  question, 
that  of  these  two  modes  of  transmission,  the  proper  one  was  adopted. 
This  one  has  in  its  favor  the  facts  that  it  carries  the  mail,  that  it  is 
the  ordinary  mode  of  transmission,  and  that  it  may  be  expected  to 
deliver  a  letter  at  an  earlier  day  than  the  other;  that  other  having 
in  its  favor  the  facts  that  it  starts  at  an  earlier  day,  and  carries  a 
letter  bag.  There  is  nothing  to  counterbalance  the  fact  that  the 
other  line  will  deliver  the  letter  at  the  earliest  day.  I  think  the 
notice  of  dishonor  was  duly  transmitted. 
I  am  of  opinion  to  affirm  the  judgment. 

The  other  judges  concurred.     Judgment  affirmed. 

'  Notice  must  be  sent  by  the  first  usual  mail  ship  whether  it  sail  direct  to  the 
port  of  the  drawer  or  indorser  or  to  some  other  port  of  the  United  States. 
Fleming  v.  McC/ure,  i  Brevard  (S.  Car.)  42S,  (1804) ;  Lenox  v.  Leverett,  10  Mass. 
I  (1813).  —  Ed. 


II.  5-]  WITHIN    WHAT   TIME.  549 

§  175  JARVIS  V.  ST.  CROIX  MFG.   CO.  [§  104J 

23  Maine,  287.  —  1S43. 

Assumpsit  against  the  defendants  as  drawers  of  a  bill  of  exchange, 
dated  Aug.  10,  1839,  on  N.  Dewey  of  the  city  of  New  York,  payable 
in  60  days  after  sight,  accepted  by  Dewey  on  Aug.  26,  1839,  and 
indorsed  by  the  defendants,  and  by  the  plaintiffs. 

The  plaintiffs  resided  at  St.  John,  New  Brunswick;  the  place  of 
business  of  the  defendants  was  at  Calais  in  this  State;  and  the 
acceptor  resided  in  the  city  of  New  York. 

The  bill  was  protested  in  the  city  of  New  York,  for  non-payment 
by  the  acceptor,  on  Oct.  28,  1839,  and  a  notice,  addressed  to  the 
defendants,  informing  them  of  the  dishonor  and  protest,  was,  at  the 
request  of  the  plaintiffs,  placed  in  the  post-office  at  Eastport  on 
the  eleventh  day  of  November,  1839.  It  was  agreed,  that  the  mail 
was  at  that  time  five  days  in  passing  from  New  York  to  Eastport;  that 
the  mail  between  St.  Andrews  and  St.  John  passed  three  times  each 
week,  leaving  the  former  place  on  Monday,  Wednesday,  and  Friday, 
and  returning  on  Tuesday,  Thursday,  and  Saturday,  leaving  each 
place  early  in  the  morning  and  arriving  late  in  the  evening;  that  the 
mail  between  Eastport  and  Calais  then  passed  on  alternate  days,  and 
on  said  eleventh  day  of  November  passed  from  Eastport  to  Calais, 
leaving  before  the  notice  was  put  into  the  office;  that  letters  to  and 
from  the  Province  of  New  Brunswick  meet  through  that  mail;  and 
that  letters  from  St.  John  for  Calais  would  not  go  by  the  way  of 
Eastport,  but  directly  from  St.  Andrews  to  Robbinston  and  from 
thence  to  Calais.  The  Court,  upon  this  evidence,  were  authorized 
to  draw  any  inferences  which  a  jury  would  be  authorized  to  do,  and 
to  order  a  nonsuit  or  default,  as  justice  might  require. 

The  opinion  of  the  Court  was  by 

Whitman,  C.  J.  —  Notice  of  the  non-payment  of  the  draft  in  this 
case  could  not  have  reached  the  defendants  before  the  i6th  or  17th 
day  after  its  dishonor.  Instead  of  sending  it  directly  from  St.  John 
to  Calais,  by  due  course  of  mail,  the  plaintiffs  seem  to  have  pre- 
ferred sending  it  to  Eastport;  and  there  to  have  mailed  it  for  the 
defendants  at  Calais.  This  was  on  the  i6th  day  after  its  dishonor 
in  New  York.  The  mail  was  five  days  in  reaching  Eastport  from 
New  York.  This  accounts  for  five  days  of  the  time.  How  it  should 
happen  that  eleven  days  more  were  necessary  to  forward  it  from 
thence  to  St.  John  and  back  to  Eastport  does  not  appear.  It  does 
not  seem,  by  the  course  of  the  mails  between  Eastport  and  St.  John, 
that  more  than  four  or  five  days  need  be  occupied  in  the  transmis- 
sion of  a  letter  and  the  return  of  an  answer.     It  is  true  that  the  phiin- 


550  NOTICE    OF   DISHONOR.  [aKT.  VIII. 

tiffs  had  a  right  to  adopt  a  private  conveyance  for  the  receipt  and 
transmission  of  notice.  But  it  is  clearly  incumbent  on  them  to 
show  that  due  diligence  was  used.  The  evidence  in  the  case  is 
entirely  silent  as  to  how  it  should  have  happened  that  so  much  greater 
delay  took  place  than  we  can  see,  from  the  evidence,  to  have  been 
necessary.  It  was  incumbent  on  the  plaintiffs  to  have  removed  any 
reasonable  doubts  upon  this  point;  and,  not  having  done  so,  we 
think  a  nonsuit  must  be  entered. 


(r)   Successive  notices. 

§  178  LINN  V.  HORTON.  [§  107] 

17  Wisconsin,   151.  —  1S63. 

Action  against  irregular  indorser  '  by  payee.  The  note  was  pay- 
able in  Janesville,  Wis.  Plaintiffs  were  merchants  in  New  York. 
Plaintiffs  indorsed  for  collection  to  K.,  in  New  York.  K.  indorsed 
for  collection  to  Central  Bank  in  Janesville.  The  latter,  on  dis- 
honor on  Nov.  22,  mailed  notices  to  K.,  who  received  them  on 
Nov.  27,  and  delivered  them  to  plaintiffs  on  that  day.  On  the  same 
day  plaintiffs  mailed  notice  to  defendant  at  Janesville,  but  it  was 
never  received  by  him.     Judgment  for  defendant. 

By  the  Court,  Dixon,  C.  J.  — It  is  an  established  principle  of  mer- 
cantile law,  that  if  the  holder  of  a  bill  or  note  chooses  to  rely  upon 
the  responsibility  of  his  immediate  indorser,  there  is  no  necessity 
for  his  giving  notice  to  any  previous  party;  and  if  such  notice  be 
properly  given,  in  due  time,  by  the  other  parties,  it  will  inure  to 
the  benefit  of  the  holder,  and  he  may  recover  thereon  against  any 
of  them.  Thus,  if  the  holder  notifies  the  sixth  indorser,  and  he  the 
fifth,  and  so  on  to  the  first,  the  latter  will  be  liable  to  all  the  parties. 
(i  Parsons  on  Bills  and  Notes,  503,  504;  and  Edwards  on  Bills  and 
Notes,  473,  474,  and  the  cases  cited.)  And  it  is  no  objection  to  such 
notice  that  it  is  not  in  fact  received  so  soon  by  the  first  or  any  prior 
indorser,  as  if  it  had  been  transmitted  directly  by  the  holder  or 
notary,  provided  it  has  been  seasonably  sent  by  each  indorser  as  he 
receives  it.  {Colt  v.  Ncble,  5  Mass.  167;  Mead  v.  Bugs,  5  Cow.  303; 
Howard  v.  Ives,  i  Hill,  263.)  And  the  same  degree  of  diligence 
must  be  exercised  on  the  part  of  the  indorser  in  forwarding  notice 
as  is  required  of  the  holder.  Ordinary  diligence  must  be  used  in 
both  cases.     He  is  not  bound  to  forward  notice  on  the  very  day  upon 


'  See  Xeg.  Inst.  L.,  ^  114  [64I.  —  En. 


II.  5-]  WITHIN    WHAT    TIME. 


551 


which  he  receives  it,  but  may  wait  until  the  next,  {ffoicardx.  Ives, 
and  the  authorities  cii-^d.) 

For  the  purpose  of  receiving  and  transmitting  notices,  those  who 
hold  at  the  time  of  protest,  and  those  who  indorse  as  mere  agents  to 
collect,  are  regarded  as  real  parties  to  the  bill  or  note;  the  former 
as  holders  in  fact,  and  the  latter  as  actual  indorsers  for  value. 
[Meadw  Engs  ;  Howards.  Ives,  supra.)  ' 

It  follows  from  these  principles,  that  the  proper  steps  were  taken 
to  charge  the  defendant  Horton  as  indorser.  Notice  for  him  was 
forwarded  by  mail,  postpaid,  on  the  day  of  the  protest,  to  the  agents 
and  last  indorsers  in  New  York,  and  delivered  by  them,  on  the  day 
it  was  received,  to  the  plaintiffs,  their  immediate  indorsers,  who,  on 
the  same  day,  deposited  it,  inclosed  in  an  envelope,  postpaid,  in  the 
post-office  at  New  York,  directed  to  the  defendant  at  Janesville,  Wis- 
consin, his  proper  post-office. 

Under  these  circumstances,  the  only  question  which  can  possibly 
arise  is,  whether  the  defendant  ought  to  be  discharged  by  reason  of 
the  notice  not  having  been  in  fact  received  by  him.  He  testifies 
that  it  was  not.  Professor  Parsons  observes,  that  in  all  the  cases  of 
constructive  notices,  where  notice  given  by  a  subsequent  to  a  prior 
indorser  has  been  held  to  inure  to  the  benefit  of  the  immediate 
indorser,  it  has  appeared  that  the  notice  was  actually  received;  and 
he  raises  a  question  whether  this  would  be  so  if  the  notice  was  sent 
to  the  wrong  place,  (i  Parsons  on  Bills  and  Notes,  504,  note,  and 
627.)^  But  here  the  notice  was  sent  to  the  right  place.  Besides,  the 
plaintiffs,  who  seek  to  avail  themselves  of  the  notice,  are  the 
indorsers  who  sent  it  to  the  defendant  as  the  indorser  next  imme- 
diately preceding  them.  W^e  have  already  seen  that  the  rule  of  dili- 
gence as  to  them  is  the  same  as  in  the  case  of  the  holder. 

Let  the  judgment  he  reversed,  and  the  cause  remanded  with  direc- 
tions to  enter  judgment  in  favor  of  the  plaintiffs  according  to  the 
demand  of  the  complaint. 


§  178  FIRST  NATIONAL  BANK  v.  FARNEMAN.        [§  107] 

93  Iowa,   161.  —  1894. 

Action  against  indorser.  Defendant  indorsed  to  plaintiff.  Plain- 
tiff indorsed  for  collection  to  Valley  Bank.  The  latter  indorsed  for 
collection   to  German   Bank,   at  Carroll,    which  place,  unknown  to 

'See  a.\so  Farmers'  Bank  v.  Vail,  21  N.  Y.  485;  Rosson  v.  Carroll,  go  Tenn. 
90.  —  Ed. 

'^  See  Beale  v.  Parrish,  20  N.  Y.  407. —  Ed. 


552 


NOTICE   OF   DISHONOR.  [ART.   VIII. 


German  Bank,  was  the  residence  of  defendant.  The  German  Bank, 
on  dishonor  on  Nov.  lo,  mailed  notices  to  Valley  Bank,  which  for- 
warded them  to  plaintiff,  who  received  them  on  Nov.  12,  and  on  that 
day  gave  personal  notice  to  defendant.  Of  the  indorsements  on  the 
bill  all  except  that  by  the  defendant  are  erased.  Judgment  for 
defendant. 

Granger,  C.  J.  .  .  .  Appellant  relies,  mainly,  in  argument, 
on  a  rule  that  the  holder  need  only  notify  his  immediate  indorser, 
and  this  indorser  the  next,  and  so  on,  and  then  claims  that  the  Ger- 
man Bank  did  notify  the  Valley  Bank.  How  such  a  rule  might  affect 
the  rights  of  parties  were  the  German  Bank  seeking  to  recover,  it  is 
not  for  us  to  say.  Defendant  is  the  immediate  indorser  of  the 
plaintiff  bank,  and,  because  of  the  erasures,  there  are  no  other 
indorsers;  and  the  rule  cited,  if  a  correct  one,  is  without  force.  It 
is  to  be  kept  in  mind  that,  as  to  the  indorsers  other  than  the  defend- 
ant, they  were  such  for  collection  only,  and  the  indorsements  were 
erased.  We  treat  the  case  on  the  theory  of  but  a  single  indorser, 
and  that  one  the  defendant. 

The  judgment  is  affirmed. 


6.  Place  at  Which  Notice  Must  Be  Given. 

§  179  [108]   Morris  v.  Husson,  4  Sandford  (N.  Y.  City  Superior 

C'rt.),  93. 1850.     Mason,  J. —  "The  addition  by  the   defendant 

of  the  words,  '  13  Chambers  Street,'  beneath  his  indorsement,  could 
have  no  other  meaning  than  a  direction  as  to  the  place  where  notice 
should  be  sent  in  case  of  the  dishonor  of  the  note,  and  the  notice 
put  in  the  post-office  addressed  to  him,  as  was  the  notice  in  this 
case,  to  No.  13  Chambers  street,  was  given  strictly  in  compliance  with 
his  directions." 

§  179  [108]  Bartlett  v.  Robinson,  39  New  York,  187.  —  1868. 
Woodruff,  J.  —  "As  well  when  the  parties  do  not  reside  in  the  same 
city  or  town  as  when  (according  to  our  statute)  they  do,  or  in  short 
whenever  notice  is  sent  by  mail  or  deposited  in  the  post-office,  the 
hotice  must  be  directed  to  the  indorser,  not  only  at  the  city  or  town, 
but  to  the  specific  place  designated  by  the  underwriting.  ...  I 
think  .  .  .  that  the  words  '  directed  to  the  indorser  at  such  city 
or  town  '  includes  as  a  part  of  such  '  directon  '  conformity  to  the  pre- 
scription which  the  special  indorsement  imports."  [Hence,  a  notice 
addressed  to  "A.  B.,  city  of  New  York,"  is  not  sufficient  where  the 
indorsement  is  "  A.  B.,  214  E.   i8th  st."]. 


^^-  ^O  AT   WHAT    PLACE.  553 

§  179  BANK  OF  GENEVA  v.  HOWLETT.  [§  108] 

4  Wendell  (N.  Y.),  328.  —  1S30. 

Action  against  indorser.  Verdict  for  defendant. 
By  the  Court,  Sutherland,  J.  _  The  verdict  is  clearly  against  the 
weight  of  evidence.  Charles  A.  Cook,  the  cashier  and  notary  of  the 
bank,  testified  that  he  regularly  protested  the  note  on  the  day  it 
became  due,  and  sent  notice  thereof  on  the  same  day  to  the  defend- 
ant, directed  to  him  at  Geddesburgh,  and  put  the  notice  in  the  post- 
office  at  Geneva.  He  did  not  recollect  whether  he  put  the  county 
on  the  notice  of  protest,  but  it  was  his  custom  to  do  so. 

It  was  shown,  on  the  part  of  the  defendant,  that  the  legal  name 
of  the  post-office  near  which  the  defendant  resided  was  Geddes,  not 
Geddesburgh;  but  all  the  witnesses  concurred  in  stating  that  it  was 
known  as  well  by  the  one  name  as  the  other,  and  that  at  least  half 
the  people  called  it  Geddesburgh;  and  Mr.  Earle,  the  postmaster  at 
Onondaga  Hill,  within  a  few  miles  of  Geddes,  testified  that  until 
lately  he  supposed  the  name  of  the  post-office  was  Geddesburgh,  and 
if  a  letter  was  put  in  his  office  directed  to  Geddesburgh,  he  should 
forward  it  to  Geddes.  He  further  stated  that  there  was  no  post- 
office,  either  in  this  State  or  in  the  United  States,  of  the  name  of 
Geddesburgh.  John  \Vilkinson,  the  postmaster  at  Syracuse,  testi- 
fied that  packages  in  the  mails  were  as  frequently  directed  to  Geddes- 
burgh as  Geddes,  except  from  the  large  offices.  Upon  this 
testimony  there  can  be  no  question,  if  the  notice  was  directed  to 
Geddesburgh  without  the  name  of  the  county,  that  it  was  sent  to 
Geddes.  But  the  fair  intendment  from  the  testimony  of  the  notarv 
is,  that  the  name  of  the  county  was  also  part  of  the  superscription. 
It  was  his  general  custom  so  to  direct  his  notices,  and  no  circum- 
stance is  stated  to  induce  the  belief  that  he  departed  from  it  in  this 
instance.  The  verdict,  therefore,  under  the  charge  should  have  been 
for  the  plaintiff. 

The  judge  decided,  as  a  question  of  law,  that  the  notice  was  good, 
if  it  was  sent  to  the  Geddes  or  Geddesburgh  post-office.  It  was 
properly  assumed  as  a  question  of  law,  and  the  opinion  of  the  judge 
was  correct. 

The  evidence  shows  that  although  the  defendant  resided  a  mile 
and  a  half  or  two  miles  nearer  to  the  post-office  at  Onondaga  Mill 
than  to  Geddes,  still  that  Geddes  was  his  place  of  business,  where 
he  carried  on  the  manufacturing  of  salt  and  the  slaughtering  and 
packing  of  beef;  that  he  received  letters  at  both  offices.  More 
letters  for  him  individually  were  received  through  the  office  at 
Onondaga  C.  H.  than  at  Geddes;  but  all  the  company  letters  were 


554  NOTICE   OF   DISHONOR.  [ART.  VIII. 

directed  to  the  latter  office.  The  defendant  or  his  sons  were  in  the 
habit  of  calling  for  letters  at  the  Geddes  office,  and  he  kept  a  postage 
account  there. 

Under  such  circumstances,  notice  directed  to  either  office  would 
be  good.  It  is  not  indispensable  that  the  notice  should  be  sent  to 
the  office  nearest  to  the  residence  of  the  party,  nor  even  to  the  town 
in  which  he  resides.  It  is  sufficient  if  it  be  sent  to  the  office  to 
which  he  usually  resorts  for  his  letters,  and  where  he  would  proba- 
bly receive  it  as  soon  as  at  the  office  nearer  to  him.  {Rcid  v.  Payne, 
i6  Johns.  R.  218;  I  Peters,  578;  10  Johns.  R.  411;  11  Id.  490.) 
When  a  party  has  a  dwelling  house  and  counting  room,  or  other  place 
of  business  in  the  same  place  or  town,  notice  sent  to  either  is  suffi- 
cient. {Bank  of  Columbia  v.  Laicrcnce,  i  Peters,  582,  583);  and  it 
cannot  be  material  whether  the  residence  of  the  party  and  his  place 
of  business  be  in  the  same  town  or  not,  if  it  appears  that  he  is  in  the 
daily  or  constant  habit  of  receiving  letters  at  both  places.  The 
notice,  therefore,  was  sufficient,  and  the  defendant  was  legally 
charged. 

It  has  been  decided  by  this  court  that  deducting  interest  by  way 
of  discount  at  the  rate  of  seven  per  cent.,  upon  commercial  or  busi- 
ness paper,  is  not  usurious.  {ManJiattan  Company  \.  Osgood,  15  Johns. 
R.  168;  Bank  of  Utica  v.  Wager,  2  Cowen,  766,  767;  Bank  of  Utica 
V.  Phillips,  3  Wendell,  408.  See,  also,  Fleckner  v.  The  Bank  of  the 
U.  S  ,  S  Wheaton,  838;  4  Yeates'  Rep.  220,  223;  9  Mass.  R.  49;  3 
Bos.  &  Pul.  154.) 

A  new  trial  must  be  granted,  on  the  ground  that  the  verdict  is 
against  evidence.' 


§  179  BANK  OF  COMMERCE  v.  CHAMBERS.  [§  108] 

14  Missouri  Appeals,  152.  —  1883. 

Action  against  maker  and  indorser.  Indorser  sets  up  want  of 
notice.  The  indorser  (Frost)  had  a  general  residence  or  domicil 
in  St.  Louis  and  a  general  place  of  business  in  St.  Louis,  but  his 
family  were  sojourning  at  Selma,  Mo.,  a  place  without  a  post-office, 
while  he  was  sojourning  in  Washington,  as  a  member  of  Congress. 

'Accord:  Montgomery  Co.  Bank  v.  Marsh,  7  N.  Y.  481;  Mercer  v.  Lancaster, 
5  Pa.  St.  160;    Shelburne  Bank  v.   Toiimsley,  102  Mass.  177. 

Where  the  indorser  lives  in  a  town  having  two  or  more  post-offices  a  notice 
addressed  to  him  at  the  town  generally  is  sufficient  unless  the  holder  knows  or 
might  reasonably  know  his  particular  post-office  address.  Saco  Nat.  Bk.  v. 
Sanborn,  63  Me.  340;  Renter  v.  Downer,  23 'Wend.  (N.  Y.)  620;  Morton  v.  West- 
cott,  8  Cush.  (Mass.)  425;  Roberts  v.   Taft,  120  Mass.  169.— Ed. 


II.  6. J  AT   WHAT    PLACE.  555 

Notices  were  mailed  to  him,  addressed  to  St.  Louis,  Washington  and 
Selma,  respectively.     Judgment  for  plaintiff. 

Thompson,  J.  [After  deciding  that  the  notices  mailed  to  St.  Louis 
were  insufficient  because  holder  and  indorser  both  resided  in  St. 
Louis.] 

We  are  of  opinion  that  the  general  notice  sent  by  mail  and 
addressed  "  Hon.  R.  Graham  Frost,  Washington,  D.  C,"  might 
properly  have  been  regarded  by  the  trier  of  facts  as  a  good  notice. 
There  is  evidence  tending  to  show  that,  before  the  notary  sent  this 
notice,  he  went  to  the  post-office  and  there  inquired  for  Mr.  Frost's 
address,  and  was  told  it  was  Washington,  D.  C,  whereupon  he 
mailed  the  notice  to  him  as  stated. 

This  was  on  the  23d  of  December,  1880.  The  Congress  was  then 
in  regular  session,  but  it  had,  on  the  day  previous,  taken  the  usual 
holiday  recess,  as  was  shown  by  a  copy  of  the  Congressional  Record 
put  in  evidence.  This  recess  was  taken  from  the  22d  of  December 
until  the  5th  day  of  January  following.  That  a  notice  of  protest 
sent  by  mail  to  a  member  of  Congress  while  engaged  in  discharging 
his  public  duties  as  such  at  Washington,  is  a  good  notice,  has  been 
held  both  in  Massachusetts  and  Mississippi.  {Chouteau  v.  Webster, 
6  Mete,  i;  Tunstall  \ .  Walker,  2  Smed.  &  M.  638.)  In  the  former 
of  these  cases,  Daniel  Webster,  a  senator  from  Massachusetts,  was, 
when  the  notice  of  protest  was  sent  to  him  by  mail,  at  Washington, 
D.  C,  attending  a  special  session  of  Congress  at  Washington,  and 
he  had  at  Boston,  just  as  Mr.  Frost  had  at  St.  Louis,  a  place  of  busi- 
ness and  an  agent  to  attend  to  his  business;  and  yet  the  court,  Chief 
Justice  Shaw  delivering  the  opinion,  held  that  the  notice  thus  mailed 
to  him  was  a  good  notice. 

The  fact  that  Congress  had  taken  this  temporary  recess  may  not 
have  been  known  to  the  notary,  and,  if  known,  it  would  not  neces- 
sarily indicate  to  him  that  Mr.  Frost  would  be  absent  from  the 
capital  during  such  recess.  If  it  should  indicate  this  it  would 
not  impair  the  legal  sufficiency  of  the  notice;  because  the  controlling 
rule  is  that  where  the  indorser  has  different  residences  and  different 
places  of  business,  the  notice  must  be  sent  to  the  place  where,  upon 
diligent  inquiry,  it  seems  most  likely  to  reach  him  with  certainty 
and  promptness.  {Cabot  Bank  v.  Russell,  4  Gray,  169,  470,  per 
Shaw,  C.  J.) 

Nor  can  the  circumstance  that  the  indorser  was  in  the  habit  of 
receiving  his  mail,  not  at  the  general  post-office  in  Washington,  but 
at  a  special  post-office  in  the  capitol  building,  impair  the  legal  suffi- 
ciency of  this  notice,  unless  this  fact  were  known  to  the  notary  or 
would  have  been  disclosed  to  him  upon  reasonable  inquiry.     That 


556  NOTICE    OF   DISHONOR,  [aRT.    Viii. 

he  did  not  know  this  appears  from  the  evidence,  and  that  it  was  not 
disclosed  to  him  upon  the  inquiry  which  he  made  at  the  post-office 
in  St.  Louis  also  sufficiently  appears.  It  seems  that  this  post-office 
was  the  most  proper  place  at  which  to  make  such  an  inquiry,  for  it 
must  be  supposed  from  the  nature  of  Mr.  Frost's  public  duties  at 
the  time  that  numerous  letters  were  constantly  received  at  the  St. 
Louis  post-office  for  transmission  to  him  at  his  official  residence  at 
Washington.  At  all  events,  it  cannot  be  said  that  this  testimony 
was  not  sufficient  to  take  the  case  to  the  trier  of  the  fact  upon  the 
question  of  diligence.  It  has  been  held  several  times,  that  where 
there  are  two  or  more  post-offices  in  the  town  where  the  indorser 
resides,  a  notice  sent  by  mail  to  the  town  generall}'  will  be  a  good 
notice,  unless  a  reasonable  inquiry  would  have  disclosed  to  the 
holder  or  the  notary  the  actual  post-office  at  which  the  indorser  com- 
monly received  his  mail.  {^Burliiigaine  v.  Foster,  128  Mass.  125; 
Morton  v.  IVcstcott,  8  Cush.  425;  Cabot  Bank  v.  Russell,  4  Gray,  167.) 

The  "  towns  "  here  spoken  of  are  not  cities  or  villages,  but  New 
England  towns,  which  correspond  to  townships  in  Missouri  and 
Illinois,  each  of  which  frequently  contains  several  villages  and 
several  post-offices. 

[The  learned  judge  then  holds  that  notice  addressed  to  Selma  was 
good,  in  view  of  the  evidence  that  mail  addressed  to  Selma  was 
regularly  sent  to  Crystal  City,  the  post-office  nearest  Selma.]  ' 

Judgment  affirmed.' 


in.  When  delay  in  giving  notice  excused. 

§  184  JAMES  V.  WADE.  [§  113] 

21  Louisiana  Annual,  548.  —  1869. 

Howe,  J. — The  defendant  is  sued  as  the  indorser  of  a  bill  of 
exchange  drawn  by  W.  R.  Hughes  on  Moore  and  Browder,  of  New 
Orleans,  and  by  the  latter  accepted,  payable  on  the  fifteenth  Febru- 
ary, 1S63. 

On  the  day  of  its  maturity  the  bill  was  protested  by  a  notary  in 
New  Orleans,  and  a  notice  deposited  in  the  post-office  in  that  city 
addressed  to  the  defendant,  at  Winnfield,  parish  of  Winn,   Louisiana. 

The  record  shows  that  in  February,  1863,  all  postal  and  commercial 
intercourse  was  suspended   between    New   Orleans   and     '\\'innfield. 

'  See  Bank  v.  Ho7vlett,  4  Wend.  328,  ante,  p.  553.  —  Ed. 

'Accord:  Graham  v.  Sanffston,  i  Md.  59.  But  if  tne  indorser  simply  visits  a 
place  for  a  purpose  clearly  temporary  and  special,  he  is  not  "  sojourning  " 
within  the  rule  of  the  above  cases.      Walker  v.  Stetson,  14  Oh.  St.  89. —  Ed. 


III.]  WHEN   DELAY    EXCUSED.  557 

The  war  was  then  raging,  and  the  deposit  of  the  notice  in  the  post- 
office  in  New  Orleans  had  no  effect  in  converting  the  conditional 
obligation  of  the  indorser  into  an  absolute  liability.  (19  A.  43,  63, 
64,  72,  90;  20  A.  399.) 

If  the  holders  of  this  bill  desired  to  bind  the  indorser,  it  was  their 
duty  to  have  given  him  notice  of  dishonor  within  a  reasonable  time 
after  the  close  of  the  war,  and  the  resumption  of  commercial  inter- 
course. There  being  no  evidence  that  any  notice  except  the  one 
described  above  was  ever  given,  the  indorser  must  be  held  to  have 
been  discharged. 

Judgment  affirmed.' 


§  184    UNION  NATIONAL  BANK  z;.  MARK'S  ADMIN-   [§  113] 

ISTRATOK. 

6  Bush  (Ky.),  614.  —  iS6q. 

Action  against  drawer  of  a  bill  drawn  in  Missouri  upon  a  drawee 
in  New  Orleans  and  presented  July  17,  1861,  and  dishonored.  Judg- 
ment for  defendant. 

Judge  Hardin  delivered  the  opinion  of  the  Court. 

This  was  an  ordinary  action  by  the  appellant,  as  the  holder  of  a 
bill  of  exchange  for  $1,262.50,  dated  at  Charleston,  Missouri,  the 
loth  day  of  June,  1861,  drawn  by  P.  N.  Marr  upon  Samuel  Y. 
Thomas,  New  Orleans,  Louisiana,  payable  to  the  order  of  Thomas 
Allen,  and  indorsed  by  him  and  Shelby  Sheeks. 

It  appears  that  the  bill  was  presented  for  acceptance  in  New 
Orleans  on  the  17th  of  July,  1861,  and  thereupon  protested  for  non- 
acceptance,  of  which  notices  addressed  to  the  parties  were  mailed 
by  the  notary  to  the  agents  of  the  plaintiff,  but  it  does  not  appear 
they  were  legally  forwarded  to  the  defendants,  who  in  tlieir  defence 
denied  that  due  notice  of  said  protest  was  given,  and  claimed 
exoneration  on  that  ground. 

The  principle  is  well  settled,  that  although  the  holder  of  a  bill  of 
exchange,  payable  at  a  given  time,  is  not  bound  to  present  it  to  the 
drawee  for  acceptance  until  it  becomes  due;  yet  if  he  does  so,  and 
the  bill  is  dishonored,  he  is  bound  to  give  due  notice  of  the  fact  to 
the  parties  whom  he  intends  to  hold  bound.  {Land/uim  v.  Troic- 
bridge,  2  Met.  281;  Story  on  Bills,  §§  227,  22S,  284.)  But  the  appel- 
lant   questions    the    correctness    of    the    judgment   dismissing   the 

'Accord:  Norris  v.  Despard,  38  Md.  487;  Dunbar  v.  Tylfr,  44  Miss,  i; 
Harden  v.  Boyce,  5g  Barb.  (N.  Y.)  425.  So,  also,  delay  occasioned  by  presence 
of  malignant  disease.      Tnnno  v.  Lagiu\  2  Johns.  Cas.  (N.  Y.)  i.  —  En. 


558  NOTICE    OF    DISHONOR.  [ART.  VIII. 

petition,  on  a  trial  of  tiie  case  by  tiie  court,  mainly  on  the  ground 
that  at  the  time  of  said  protest  the  civil  war  had  become  flagrant, 
and  so  suspended  commercial  intercourse  between  the  hostile  sec- 
tions of  the  country  as  to  dispense  with  the  necessity  of  notice  of 
protest  to  bind  the  drawer  and  indorsers  of  said  bill;  and  especially 
so  as  the  bill  was  not  protested  till  after  the  passage  of  the  act  of 
Congress  of  the  13th  of  July,  1861,  authorizmg  the  President  to 
issue  his  proclamation  interdicting  commercial  intercourse  between 
the  citizens  of  certain  belligerent  States,  although  the  proclamation 
was  not  issued  till  the  i6th  of  August,  1861,  near  one  month  after 
the  bill  was  protested. 

But  this  case  must  be  ruled  by  the  case  of  Leathers  v.  The  Com- 
mercial Insurance  Co.  (2  Bush.  296),  in  which,  upon  a  careful  con- 
sideration of  the  subject,  this  court,  referring  to  the  proclamation 
of  the  i6th  of  August,  1861,  as  public  notice  of  the  congressional 
recognition  of  a  state  of  war,  held  that  "  before  that  time  contracts 
and  other  acts  of  commercial  intercourse  were  not  made  illegal  by 
the  war." 

Notwithstanclmg  the  disturbed  condition  of  the  country,  which 
we  know  judicially  to  have  existed  when  the  bill  was  protested,  it 
does  not  appear  that  there  was  at  that  time  such  obstruction  of  inter- 
communication between  the  Southern  and  border  States  as  to  pre- 
vent the  transmission  and  delivery  of  notice  of  the  dishonor  of  said 
bill. 

Wherefore,  it  not  apearing  to  have  been  either  illegal  or  morally 
or  physically  impossible  to  give  notice  of  said  protest,  the  judgment 
is  affirmed.' 


IV.  When  notice  may  be  dispensed  with. 

I.  When  Notice  Need  Not  Be  Given  to  Drawer. 

§  185  GOWAN  V.  JACKSON.  [§  II4] 

20  Johnson  (N.  Y.),  176.  —  1S22. 

Action  agamst  drawer  of  bill  drawn  on  Jackson  and  Brothers. 
There  was  no  notice  of  dishonor,  but  to  excuse  this  plaintiff  offered  to 
prove  that  defendant  was  a  member  of  the  firm  on  which  the  bill  was 
drawn,  and  was  allowed  to  do  so.     Judgment  for  plaintiff. 

Spencer,  Ch.  J.  .  .  .  Considering  it,  then,  as  established, 
that  the  partnership  existed  when  the  bill  was  drawn  and  presented. 


'  See  criticism  of  this  doctrine  in  2  Daniel  on  Neg.  Inst.,  §  1062.  —  En. 


i^'-]  WHEN   NOTICE   DISPENSED    WITH. 


559 


the  question  arises,  whether  notice  of  non-acceptance  was  required 
to  be  given  to  the  defendant.  It  was  proved  that  the  bill  was  pre- 
sented for  payment  on  the  i6th  of  January,  iSiS,  and  was  then  pro- 
tested for  non-acceptance;  and  it  was  presented  on  the  i6th  of  April, 
1818,  for  payment,  and  protested.  In  the  absence  of  all  other  proof, 
the  bill  must  be  considered  as  drawn  by  one  partner  of  the  firm,  on 
the  firm  itself,  in  relation  to  the  partnership  business;  and  if  so, 
then  a  knowledge  by  one  of  the  firm  of  the  dishonor  of  the  bill,  is, 
in  point  of  law,  knowledge  by  the  whole  firm.  Daniel  Jackson,  the 
partner  in  London,  had  notice  that  the  bill  was  refused  acceptance 
and  payment,  for  he  was  the  person  who  thus  refused.  In  Porthouse 
V.  Parker  and  others  (i  Camp.  N.  P.  82),  Lord  Ellenborough  held, 
that  where  a  bill  had  been  accepted  by  one  of  the  defendants,  this 
was  sufficient  evidence  of  its  having  been  regularly  drawn;  and  that, 
the  acceptor  being  likewise  a  drawer,  there  would  be  no  occasion  for 
the  plaintiff  to  prove,  that  the  defendants  had  received  express 
notice  of  the  dishonor  of  the  bill,  as  this  must  necessarily  have  been 
known  to  one  of  them,  and  the  knowledge  of  one  was  the  knowledge 
of  all.  This  is  a  very  just  and  reasonable  principle;  for  although 
Joseph  Jackson  is  alone  sued  on  the  bill,  yet,  as  has  been  already 
observed,  it  must  be  deemed  a  partnership  transaction;  and  a  knowl- 
edge by  one  of  the  firm  of  the  dishonor  of  the  bill,  was  all  that  ought 
to  be  required. 

Judgment  for  the  plaintiffs.' 

■Accord:  Rhett  v.  Poc,  2  How.  (U.  S.)  457;  Fuller  v.  Hooper,  3  Gray  (Mass.) 
334- 

Fictitious  Drawee.  —  Excuse  of  presentment  {ante,  %  142  [82]  ),  and  notice  in 
the  case  of  a  fictitious  drawee  seems  to  be  based  upon  the  reason  that  the 
drawer  must  know  that  the  drawee  is  fictitious  and,  therefore,  that  the  bill  can- 
not be  presented  or  paid.  He  is,  therefore,  from  the  outset  the  original  prom- 
isor.    Smith  V.  Bellamy,  2  Starkie,  223;  Leach  v.  Hewitt,  4  Taunt.  731. 

DR.A.WEE  Without  Capacity  to  Contract.  —  The  reason  in  this  case  is  not  so 
clear.  Presentment  does  not  seem  to  be  dispensed  with  (ante,  §  142  [82],  but 
see  §  139  [79]).  Then  why  notice,  since  it  may  be  that  the  drawee  (say  an 
infant)  will  honor  and  pay  the  bill?  See  the  reasoning  in  IVyman  v.  Adams,  12 
Cush.  (Mass.)  210,  which,  however,  was  a  case  of  indorsement.  See  post,  ^  i36 
[115]. 

Presentment  to  Drawer.  —  This  clause  seems  to  cover  the  case  where  the 
drawer  is,  before  the  presentment,  appointed  the  executor  or  trustee  of  the 
drawee's  estate,  and  presentment  is,  therefore,  made  to  him  in  his  representative 
capacity.  Actual  knowledge  here  is.  therefore,  equivalent  to  notice.  Caunt  v. 
Thompson,  7  C.  B.  400.  But  presentment  must,  to  insure  this  result,  be  made 
to  him  in  his  representative  capacity.  Ma^^ruder  v.  Bank,  3  Pet.  (U.  S.)  87. 
And,  it  seems,  to  him  personally.  Groth  v.  Gy^cr,  31  Pa.  St.  271.  Sec  post. 
§  186  [115].  — Ed. 


560  NOTICE    OF   DISHONOR.  [ART.  VIII. 

§  185  CATHELL  V.  GOODWIN.  [§  II4] 

I  Harris  &  Gill  (Md.),  46S.  — 1827. 

Action  by  payee  against  drawer  of  bill  of  exchange.     No  notice 
of  dishonor.     Judgment  for  defendant. 

DoRSEY,  J.      .     .     .     The  third  position  was  that  most  obstinately 
contended  for,  which  was  conceived  to  be  impregnably  fortified  by 
that  part  of  the  rule  established  in  Eichelberger  v.  Finlcy  and  Van 
Lear  (7  Harr.  &  Johns.  381),  which  dispenses  with  notice  only  where 
the  drawer  had  no  reasonable  grounds  to  expect  that  his  bill  would 
be  honored.     The  reasonableness  of  such  expectation  is  matter  for 
the  court,  and  not  for  the  jury,  to  decide.     If  the  facts,  upon  which 
the  question  arises,  be  admitted  or  be  undeniable,  then  the  question 
becomes  exclusively  a  matter  of  law  to  be  pronounced  by  the  court; 
but  if  the  facts  be  controverted,  or  the  proof  be  equivocal  or  contra- 
dictory, then  it  becomes  a  mixed  question  both  of  law  and  fact,  in 
which  case,  the  court  hypothetically  instruct  the  jury  as  to  the  law, 
to  be  by  them  pronounced  accordingly  as  they  may  find  the  facts. 
What  are  the  facts  to  be  found  in  this  case  justifying  the  drawer's 
expectation  that  his  draft  would  have  been  paid?     So  far  from  hav- 
ing funds  in  the  drawee's  hands,  he  was  his  debtor  —  no  proof  of 
such   a  commercial    intercourse    between   them    as    would   imply  a 
mutual  credit  —  no  previous  promise  by  the  drawee  to  accept  this 
or  any  other  draft  for  the  drawer's  accommodation  —  no  consign- 
ment of  goods  to  the  drawee,  which  the  drawer  had  any  reason  to 
expect  would  be  received  in  time  to  meet  his  bill,  but  the  only  proof 
is,  that  the  drawee  informed  the  payee  that  he  expected  funds  of 
the  drawer    would    shortly  come  to    his  hands,    with  which,   when 
received,    he   would   pay.     That   funds   afterwards   did    arrive,   but 
whether  in  one  month,  or  five  years  after,  does  not  appear.     What 
may  have  been  the  expectations  of  the  drawee,  as  to  the  receipt  of 
funds  from  the  drawer,  is  immacerial;  they  are  not  even  admissible 
evidence  in  this  cause.     But  if  they  were,  they  can  have  no  influence 
on  those  of  the  drawer  —  into  whose  expectations  only  is  the  inquiry 
to  be  made.     The  facts  in  the  case  of  Lcgge  v.  Thorpe  (12  East,  170), 
and  Claridge  v   Dalton  (4  Maule  &  Selw.  226),  afford  much  stronger 
evidence  of  a  reasonable  expectation  in  the  drawers  that  their  bills 
would  be  honored,  than   those  in  the  present  case ;  yet  there  they 
were  adjudged  insufficient.     The   "  reasonable  grounds  "   required 
by  law  are  not  such  as  would  excite  an  idle  hope,  a  wild  expectation, 
or  a  remote  probability,  that  the  bill  iright  be  honored,  but  such  as 
create    a    full    expectation,    a    strong    probability   of    its    payment; 
such  indeed  as  would  induce  a  merchant  of  common  prudence  and 


IV.]  WHEN   NOTICE   DISPENSED   WITH.  $6l 

ordinary  regard  for  his  commercial  credit,  to  draw  a  like  bill.  The 
facts  in  this  case  constitute  no  such  reasonable  grounds.  We  there- 
fore think  that  the  county  court  erred  in  instructing  the  jury  that 
the  plaintiff  was  not  entitled  to  recover,  and  consequently  reverse 
their  judgment. 

Judgment  reversed,  and  procedendo  awarded.' 


2.  When  Notice  Need  Not  be  Given  to  Indorser. 

§  i86  HULL  r.  MYERS.  [§  115] 

go  Georgia,  674.  —  1892. 

Action  by  one  indorser  against  a  joint  indorser  for  contribution. 
Defence,  want  of  notice  and  protest. 

Notes  were  made  by  the  Augusta  Athletic  Association  and  indorsed 
by  plaintiff,  defendant,  and  others,  being  a  majority  of  the  directors 
of  the  Association.     At  maturity,  the  Association  was  insolvent. 

Bleckley,  Chief  Justice.  —  Good  sense,  good  morality,  and 
good  law  are  one  and  the  same  so  long  as  they  are  not  sundered 
violently  by  legislation  or  ignorantly  by  judicial  error.  Their  unity 
and  identity,  so  far  as  one  of  the  questions  in  this  case  is  concerned, 
we  find  still  intact.  There  is  no  statute  to  drive,  neither  is  there 
any  precedent  to  lead,  decision  into  absurdity  or  injustice.  We  can 
and  do  hold  that  accommodation  indorsers  who  represent  their  insol- 
vent principal  in  procuring  a  loan  of  money  for  the  principal's  use, 
upon  a  promissory  note  which  they  cause  to  be  made  in  his  name 
and  w^hich  they  indorse  in  their  own  names,  they  having  at  the  time 
full  control  of  his  business  and  all  his  assets,  and  their  relation  to 
him  being  such  as  to  make  it  their  duty  to  see  that  the  note  is  pro- 
vided for  and  paid  at  maturity,  are  not  entitled  to  notice  of  its  dis- 
honor. May  be  they  do  not  stand  in  his  shoes;  if  they  do  not,  it  is 
because  they  are  his  shoemakers  and  have  suffered  him  to  become 
and  remain  barefooted.  Though  the  debt  is  his  and  not  their  own, 
primarily,  yet,  having  all  his  assets  and  full  power  over  them,  and 
over  all  his  business,  they  are  bound  to  know  all  that  he  would  be 
bound  to  know  were  his  business  and  assets  in  his  own  hands  and 
under  his  own  management.  In  this  instance  the  principal  being  a 
corporation,  and  the  indorsers  the  corporate   directors,    the   latter 

>See  also   Robinson  v.Ames,   20  Johns.  (N.  Y.)  146,  post,  p.  633.     Accommo- 
dation  drawers,  who  unite  with  the  accommodated  party  in  drawing  the  bill, 
are  entitled  to  notice  if  they  had  reason  to  believe  that  the  latter  would  provide 
funds  to  meet  the  bill.     Miser  v.   Trovinger's  Executors,  7  Oh.  St.  281.  —  Ed. 
NEGOT.  INSTRUMENTS — 36. 


562  NOTICE   OF   DISHONOR.  [ART.  VIII. 

could  have  no  right  or  reason  to  expect  that  funds  would  be  pro- 
vided for  liquidating  the  debt  unless  it  was  done  by  their  procure- 
ment or  through  their  agency.  The  charter  of  the  ' '  Augusta  Athletic 
Association  "  is  not  before  us,  and  in  its  absence  we  must  take  it  for 
granted  that  the  directors  of  that  corporation  had  the  powers  and 
were  under  the  duties  which  appertain  to  corporate  directors  accord- 
ing to  the  general  rules  of  law.  Special  provisions  in  the  charter 
might  vary  these  powers  and  duties  in  the  given  instance,  but  such 
provisions  would,  m  order  to  gain  recognition,  have  to  be  brought 
to  the  attention  of  the  court.  The  usual  rule  is  that  all  the  assets 
and  operations  of  a  corporate  business  are  under  the  government 
and  control  of  the  directors.  A  single  director,  or  even  a  minority 
of  the  directors,  indorsing  a  note  for  the  corporation,  might  be 
entitled  to  notice  of  dishonor;  for  one  only,  or  a  small  number, 
might  have  a  right  to  suppose  that  the  note  would  be  attended  to  at 
maturity;  but  when  the  whole  board,  or  a  majority  of  its  members, 
unite  in  the  indorsement,  each  and  all  so  indorsing  should  be 
charged  with  the  duty  and  responsibility  of  protecting  the  paper, 
since  the  power  to  control  the  conduct  of  the  corporation  in  respect 
to  paying  or  not  paying  would  be  in  their  own  hands.  On  the  ques- 
tion of  notice,  the  present  case  is  fairly  and  fully  within  the  principle 
of  Corneyv.  Da  Costa  (i  Espinasse,  302),  in  which  it  was  held  that 
where  the  indorser  of  the  notes  of  an  insolvent  person  took  effects  of 
the  insolvent  to  the  full  amount  of  his  indorsement,  he  could  not  avail 
himself  of  the  want  of  notice  of  non-payment  of  the  notes  at  maturity. 
The  facts  of  that  case  are  meagerly  stated  in  the  report,  but  they 
indicate  that  the  indorser  took  the  maker's  effects,  not  merely  to 
hold  them  for  his  protection,  but  for  use  in  raising  funds  with  which 
to  discharge  the  indorsed  paper.  He  was  treated  as  if  he  were 
primarily  liable  and  the  debt  were  his  own.  Following  the  reason 
and  spirit  of  that  decision,  these  directors  ought  to  be  treated  in  the 
same  way.' 

With  respect  to  the  want  of  protest,  it  is  true  that  the  letter  of  the 
Code,  §  2781,  makes  protest  necessary  in  order  to  bind  indorsers 
upon  any  bill  or  promissory  note  payable  at  a  bank,  thus,  in  effect, 
putting  all  such  paper  on  the  footing  of  foreign  bills  of  exchange  as 
to  this  commercial  solemnity.  But  the  requirement  as  to  protest  was 
not,  we  think,  intended  to  be  more  comprehensive  than  the  require- 
ment as  to  notice.^     . 

[The  Court  then  holds  that  the  action  is  barred  by  the  statute  of 

'  Contra:  Phipps  v.  Harding,  70  Fed.  Rep.  46S.  —  Ed. 

'^  Protest  not  necessary  where  notice  dispensed  with.  Legge  v.  Thorpe  12 
East.  171-  —  Ed. 


IV.]  WHEN   NOTICE   DISPENSED   WITH.  563 

limitations,  being  for  money  paid  to  the  defendant's  use  and  not 
founded  directly  on  the  notes.] 


§  186      AMERICAN  NATIONAL  BANK  v.  JUNK  BROS.  [§  115] 

94  Tennesee,  624.  —  1894. 

Beard,  J.  —  This  suit  was  instituted  against  the  Junk  Bros.  Lum- 
ber and  Manufacturing  Co.,  a  corporation  with  its  situs  in  Nashville, 
as  the  indorser  for  value  of  certain  domestic  negotiable  notes.  The 
defendant  resisted  recovery  on  the  ground  that  notice  of  dishonor 
of  the  paper  was  not  given  as  the  law  requires.  A  decree  having 
been  pronounced  against  the  corporation,  it  has  filed  the  record  in 
this  Court,  and  the  action  of  the  Court  below  in  overruling  this 
defence  is  assigned  as  error. 

Before  coming  to  the  general  (juestion  raised  by  the  assignments, 
it  is  proper  to  dispose  of  five  of  these  notes,  which  are  shown  by 
the  proof  to  have  been  made  for  the  accommodation  of  this  corpora- 
tion and  afterwards  indorsed  by  it  to  the  complainant.  As  to  these 
no':es,  their  makers  stood  in  the  situation  of  sureties  to  the  indorser, 
and  it  was  the  latter's  duty  to  provide  funds  to  meet  them  at 
maturity,  and  it  was,  therefore,  bound  to  the  holder  without  present- 
ment, protest,  or  notice.  (2  Am.  &  Eng.  Ency.  of  Law,  399;  2 
Daniel  on  Neg.  Inst.,  §  1085;  3  Randolph  on  Com.  Paper,  §  1205; 
Black  V.  Fizer,  10  Heis.  48.)  Thus  disposing  of  those  five  notes,  the 
question  recurs  as  to  the  liability  of  the  defendant  as  indorser  of 
the  remaining  thirty-five. 

[The  Court  then  holds  that  as  to  these,  notice  addressed  to  the 
company  and  received  by  its  assignee  for  the  benefit  of  creditors  is 
sufficient,  and  that  notice  addressed  to  the  assignee  is  equally  suffi- 
cient.]' 

Judgment  affirmed.' 


3.  When  Notice  to  Drawer  or  Indorser  Dispensed  With. 

{a)  Due  diligence. 

§  183  [112]  Ransom  r.  Mack,  2  Hill  (N.  Y.),  587,  592.  — (1842). 
By  the  Court,  Bronson,  J.  —  The  next  inquiry  is,  whether  the 
defendant  was  discharged  in  consequence  of  the  misdirection  of  the 
notice.      It  was  sent  to  North  Adams,  when  it  should  have  been  sent 


'  See  §  172  [loi],  aute.  —  En. 

«  Accord:    Blendcrman  v.  Price,  50  N.  J.  L.  296;  Klu-ttv.  Poc,  2  How.  (U.  S.) 
457.  —Ed. 


564  NOTICE    OF   DISHONOR.  [ART.  VIII. 

to  the  Appling  office.  The  defendant's  place  of  residence  not  being 
known,  the  notary  made  inquiry  of  Robbins,  the  second  indorser, 
who  professed  to  be  able  to  give  the  necessary  information,  and  was 
interested  to  speak  truly.  The  answer  of  Robbins  was,  that  the 
notice  should  be  sent  to  North  Adams  —  that  being  the  office  where 
the  defendant  got  his  letters  and  papers.  Although  Robbins  was 
mistaken,  the  nota/y  was  well  warranted  in  acting  upon  information 
thus  obtained,  without  pushing  his  inquiries  further.  There  was 
due  diligence,  and  that  is  enough.  [Bank  of  Utica  v.  Bender^  21 
Wend.  643.)  That  case  was  aftirmed  on  error  brought  in  June,  1841. 
Drawers  and  indorsers  can  easily  prevent  mistakes  of  this  kind,  by 
writing  under  their  names  their  places  of  residence  or  the  place 
where  they  desire  notice  should  be  sent  in  case  the  bill  or  note  is 
protested.* 


(/')    Waiver 
%  180  GOVE  V.  VINING.  [§  109] 

7  Metcalf  (Mass.),  212.  —  1843. 

Action  against  indorser.  Defence,  want  of  demand  and  notice. 
The  indorser,  shortly  before  maturity,  requested  the  holder  not  to 
sue  the  note  until  the  maker  saw  the  holder. 

Shaw,  C.  J.  .  .  .  The  court  are  of  opinion  that  when  the 
indorser,  at  or  shortly  before  the  time  when  the  note  becomes  due, 
says  to  the  holder,  that  an  arrangement  for  its  payment  is  about 
being  made,  and  in  direct  terms,  or  by  reasonable  implication, 
requests  the  holder  to  wait  or  give  time,  it  amounts  to  an  assurance 
that  the  note  will  be  paid  —  that  the  promisor  or  indorser  will  pay 
it  —  and  is  a  waiver  of  demand  and  notice.  It  tends  to  put  the 
holder  off  his  guard,  and  induces  him  to  forego  making  a  demand  at 
the  proper  time  and  place;  and  it  would  be  contrary  to  good  faith, 
to  set  up  such  want  of  demand  and  notice  —  caused  perhaps  by  such 
forbearance  —  as  a  ground  of  defence.  {Leffingtvdl  v.  IV/iite,  i 
Johns.  Cas.  99;  Mechanics'  Bankx.  Gristvold^  7  Wend.  165;  Leonard 
V.  Gary,  10  Wend.  504;  Taunton  Bank  v.  Richardson,  5  Pick.  436; 
Thornton  v.  JFvnn,  12  Wheat.  1S3;  JVood  \.  Broken ^  i  Stark.  R.  217.) 

Judgment  for  the  plaintiffs.^ 

'Accord:  Lambert  \.  Ghiselhi,  9  How.  (U.  S.)  552;  Cent>-al  iV.  B.  v.  Adams,  11 
S.  Car.  452.  Merely  consulting  a  directory  is  not  due  diligence.  Bacon  v. 
Hanna,  137  N.  Y.  379.  Nor  casual  inquiries.  Spencer  v.  Bank,  3  Hill  (N.  Y.) 
520.     See  2  Daniel  on  Neg.  Inst.,  ^§  1114-1123.  —  Ed. 

'  A  waiver  in  the  instrument  itself  binds  all  subsequent  indorsers.     Phillips  v. 


IV.]  WHEN    NOTICE   DISPENSED   WITH.  565 

§  180  CURTIS  V.  SPRAGUE.  [§  109J 

51  California,  239.  —  1876. 

\_Rcportcd  herein  at  p.   268.]  ' 

Dippo,  93  Iowa  35  (1894).  It  is  not  therefore  a  material  alteration  in  such  a  case 
to  write  above  the  indorser's  name,"  Payment  guarantied."  lo'cva  Valley  State 
Bank  V.  Sigstad,  96  Iowa  491;  65  N.  W.  407  (1S95). 

Parol  Waiver  at  Time  of  Indorsement.  —  It  some  jurisdictions  it  is  held 
that  a  parol  waiver  made  at  the  time  of  the  indorsement  may  be  shown  on  the 
theory  that  such  evidence  does  not  vary  the  terms  of  the  written  contract  but 
establishes  the  waiver  of  a  condition  otherwise  imported  into  the  contract  by 
the  rules  of  the  law  merchant.  Schmiedv.  Franks  86  Ind.  250;  Lane  v.  Ste-ward, 
20  Me.  98;  Dye  v.  Scott,  35  Oh.  St.  194;  Annville  Nat.  Bk.  v.  Kettering,  106  Pa. 
St.  531.  In  other  jurisdictions  it  is  held  that  such  evidence  does  vary  the  terms 
of  the  written  contract,  and  is  therefore  inadmissible.  Goldman  v.  Davis,  23 
Cal.  256;  Farwcll  v.  St.  Paul  Trust  Co.,  45  Minn.  495;  Rodney  v.  Wilson,  b-j 
Mo.  123;  Bceler  v.  Frost,  70  Mo.  1S5;  Bank  v.  Smith,  47  Barb.  (N.  Y.)489.  Some 
jurisdictions  now  provide  by  statute  that  all  waivers  must  be  in  writing.  Maine 
R.  S.,  c.  32,  §  10. 

A  parol  waiver,  subsequent  to  the  time  of  the  indorsement  is  (independent  uf 
statute)  good.  Alarkland  v.  McDaniel,  51  Kans.  350;  Rodney  \.  IVilson,  67  ]Mo. 
123;  2  Daniel  on  Neg.  Inst.,  §  109S.  —  Ed. 

'  A  promise  to  pay  the  instrument,  made  by  an  indorser  after  maturity  and 
after  he  is  discharged  for  want  of  demand  or  notice,  is,  in  analogy  with  the 
promise  to  pay  a  debt  barred  by  the  statute  of  limitations,  held  to  be  binding. 
Ross  V.  Hurd,  71  N.  Y.  14;  Riiidge  \.  Kimball,  124  Mass.  209;  Breed  \.  Hillhouse, 
7  Conn.  523;  Oxnard  v.  Varnuiii,  ill  Pa.  St.  193;  Smith  v.  Curlee,  59  111.  221; 
Parsons  v.  Dickinson,  23  Mich.  56.  Contra:  Scbree  Deposit  Bank  v.  Moreland, 
95  Ky.  150,  where  it  is  held  that  such  a  promise  is  presumptive  evidence  that 
demand  and  notice  were  had,  but  that  the  presumption  may  be  rebutted. 

In  order  that  the  indorser  may  be  bound  by  such  subsequent  promise  he 
must  have  knowledge  of  the  laches,  and  all  the  material  facts  constituting  such 
laches.  Parks  v.  Smith,  155  Mass.  26;  Bank  v.  Bank,  49  Oh.  St.  351;  Schierl  v. 
Baumel,  75  Wis.  69.  But  it  is  not  necessary  that  he  should  understand  the 
legal  effect  of  such  laches.  Cheshire  v.  Zi/j^r,  29  Iowa,  492;  Givens  v.  Bank, 
85  111.  444;  Matthews  v.  Allen,  16  Gray  (Mass.)  594. 

Waiver,  at  or  before  maturity,  of  presentment  and  notice  upon  an  instrument 
indorsed  by  a  partnership  may  be  by  one  of  the  partners  as  agent  of  the  others, 
and  this  even  though  the  partnership  is  dissolved,  since  it  docs  not  create  a  new 
liability.  Seldncr  v.  Mount  Jackson  N.  B.,  66  Md.  4S8;  Star  Wagon  Co.  v. 
S-cuezey,  52  Iowa,  391.  But  it  seems  that  waiver  after  maturity,  the  firm  being 
discharged  for  want  of  presentment  or  notice,  would  not  revive  the  obligation. 
2  Daniel  on  Neg.  Inst.,  §  1109a,  citing  Hart  v.  Long,  i  Rob.  (La.)  83;  Mauney  v. 
Coit,  80  N.  C.  300;  Baer  v,  Leppert,  12  Hun  (N.  Y.)  516.  —  Ed. 


566  NOTICE   OF   DISHONOR.  [ART.  VIII. 

§  182  SHAW  ,-'.  McNeill.  [§  m] 

95  North  Carolina,  535.  —  1886. 

Action  against  indorser  of  inland  bill  of  exchange  for  $90  upon 
the  margin  of  which  were  the  words  "No  protest."  There  was  no 
notice  of  dishonor.  After  dishonor  defendant  offered  to  pay  $60  for 
the  draft.     Judgment  for  plaintiff. 

Ashe,  J.  .  .  .  His  Honor  charged  the  jury  that  they  might 
consider  the  words  "  No  protest,"  on  the  draft,  and  the  language 
and  conduct  of  defendant  when  he  was  informed  by  the  plaintiff  of 
the  non-payment,  and  the  offer  to  pay  $5o.oo;  and  that  if  the 
defendant  had  offered  to  pay  $60.00,  as  alleged  by  Shaw,  it  amounts 
to  a  waiver. 

We  find  no  such  error  in  the  charge  as  entitles  the  defendant  to  a 
new  trial.  There  is  some  fluctuation  in  the  decisions  of  the  courts 
upon  the  question,  how  far  a  promise  to  pay  a  part  of  a  draft  is  a 
waiver  of  demand  and  notice  of  non-payment.  For  instance,  it  has 
been  held  by  some  of  the  authorities,  that  when  the  promise  is  only 
as  to  part  of  the  sum,  it  is  only  a  waiver/rt*  tanto,  and  the  plaintiff 
could  only  recover  that  amount.  {^Fletcher  v.  Froggart,  2  Car  &  P. 
569,  12  E.  C.  L.  R.)  On  the  other  hand,  it  has  been  held,  that  "  a 
promise  to  pay  generally,  or  a  promise  to  pay  a  part,  or  a  part  pay- 
ment made  with  a  full  knowledge  that  he  has  been  fully  released 
from  liability  on  the  bill  by  the  neglect  of  the  holder,  will  operate 
as  a  waiver,  and  bind  the  party  who  makes  it  for  the  payment  of  the 
whole  bill."  [Dixon  v.  Elliot^  5  Car.  &  P.  437;  Margetson  v.  Aitkin, 
3  Car.  &  P.  388;  Harvey  v.  Troupe,  23  Miss.  538.)  So  it  would 
seem,  that  the  weight  of  the  authorities,  supported  the  charge  of  the 
judge  in  this  particular. 

But  aside  from  this,  his  Honor,  in  his  charge  to  the  jury,  told 
them  they  might  consider  the  words  "  No  protest,"  written  on  the 
margin  of  the  draft,  as  evidence  of  a  waiver  of  notice  of  presentment 
and  non-payment.  The  words  "  No  protest,"  written  on  the  margin 
of  this  draft,  must  have  been  put  there  with  an  object,  and  we  can 
conceive  of  none  other  than  to  dispense  with  the  notice  of  present- 
ment and  refusal  to  pay,  otherwise  it  is  unmeaning. 

It  is  well  settled  that  protest,  being  a  part  of  the  custom  of  mer- 
chants which  is  essential  in  foreign  bills  to  fix  the  drawee  and 
indorsers  with  liability,  is  not  necessary  for  such  a  purpose  in  inland 
bills.  [Hubbard  \ .  Troy,  2  Ired.  134;  i  Parsons  on  Notes  and  Bills, 
643.)  But  even  in  foreign  bills  the  protest  may  be  waived.  There 
the  words,  "  I  waive  protest,"  or  "  Waiving  protest,"  or  any  similar 
words,  infer  that  the  protest  is  waived,  and  when  applied  to  foreign 


IV.]  WHEN   NOTICE   DISPENSED   WITH.  567 

bills,  was  universally  regarded  as  expressly  waiving  presentment  and 
notice,  the  protest  being,  according  to  the  law  merchant,  the  formal 
and  necessary  evidence  of  the  dishonor  of  such  an  instrument.  In 
waiving  "  protest,"  the  party  is  considered  not  only  as  dispensing 
with  a  formality,  but  as  dispensing  with  the  necessity  of  the  steps 
which  must  precede  it,  and  of  which  it  is  merely  the  formal,  though 
necessary,  proof  of  what  the  law  required.  (2  Daniel  on  Neg.  Inst., 
sj  1095.)  But  when  the  waiver  of  protest  is  applied  to  inland  bills,  the 
protest  having  no  application  to  such  instruments,  there  is  a  diversity 
of  opinion  in  the  Courts  and  text-books,  whether  such  a  waiver  would 
have  the  effect  of  dispensing  with  notice  in  an  action  upon  an  inland 
bill.  But  the  better  opinion  is,  that  as  the  word  "  protest  "  has  by 
general  usage  a  well-known  signification,  and  wherever  it  is  used,  it 
is  supposed  to  mean  something  more  than  the  formal  declarations  of 
a  notary.  Hence,  Mr.  Daniel,  who  is  a  very  high  authority  on  the 
subject,  says,  "  The  weight,  as  well  as  the  number  of  authorities, 
predominates  in  favor  of  construing  a  waiver  of  "  protest  "  to  signify 
as  much  when  applied  to  inland  bills  and  notes,  as  when  used  in 
respect  to  a  foreign  bill." 

"  Inland  bills  and  promissory  notes  may  be  protested,  by  statutory 
enactments,  in  many  States,  and  the  protest  is  accorded  the  same 
effect  as  to  them,  when  it  is  made,  though  it  is  not  necessary  to 
make  it,  and  the  weight,  as  well  as  the  number  of  authorities,  pre- 
dominate in  favor  of  construing  a  waiver  of  protest  to  signify  as 
much  when  applied  to  inland  bills  and  notes,  as  when  used  in  respect 
to  a  foreign  bill."      (§  iog-,a,  and  the  cases  cited  in  note  2.) 

The  doctrine  there  laid  down,  must  then  apply  to  this  bill,  for  we 
have  a  statute  which  provides  that  when  it  may  be  necessary  to 
prove  a  demand  upon,  or  notice  to  the  drawer  or  indorser  of  a  bill 
of  exchange,  or  a  promissory  note,  or  other  negotiable  security,  the 
protest  taken  before  a  proper  officer  shall  be  J>rima /adf  evidence 
that  such  demand  was  made,  or  notice  given,  in  the  manner  set  forth 
in  the  protest.      (The  Code,  §  49.) 

Our  conclusion  is,  there  was  no  error.  The  judgment  of  the 
Superior  Court  is  therefore  affirmed. 

Xo  error.  Affirmed.' 


'  Waiver  of  protest  is  waiver  of  presentment  and  notice.  There  seems  to  be 
no  decision  on  this  point  as  far  as  concerns  a  foreign  bill  of  exchange,  although 
the  text  writers  lay  down  the  rule  in  positive  terms.  2  Daniel  on  Neg.  Inst., 
§  1095;  Broun  v.  //«//,  33  Gratt.  (Va.)  23,  31  {dictum).  In  the  case  of  inland 
bills  and  promissory  notes,  the  conclusion  is  general  that  "  waiving  protest  " 
waives  presentment  for  payment  and  notice  of  dishonor.  Lancaster  First  K". 
B.  V.  Hartman,  no  Pa.   St.  196;  Johnson  v.  Parsons,  140  Mass.  173;  Jaccard  v. 


568  NOTICE    OF   DISHONOR.  [ART.  VIII. 

(r)  Prior  notice  for  non-acceptance. 

§  187  DE  LA  TORRE  v.  BARCLAY.  [§  116] 

I  Starkie  (K.  B.)  7.  —  1814. 

Action  against  drawer  of  a  bill.  Defence,  want  of  protest  and 
notice. 

"  But  on  further  inquiry,  it  turned  out  that  the  defendants'  objec- 
tion did  not  relate  to  the  want  of  protest  upon  the  first  dishonor  of 
the  bill,  but  to  the  want  of  protest  on  the  bill  being  refused  payment 
on  a  subsequent  presentment  at  the  defendants'  request. 

Upon  this  explanation,  Lord  Ellenborough  was  of  opinion  that 
the  answer  amounted  to  an  admission  of  liability,  since  a  second 
protest  was  perfectly  gratuitous  and  unnecessary 


V.  Duties  of  holder  :  protest. 

§  189  SUSSEX    BANK  v.  BALDWIN.  [§  118] 

17  New  Jersey  Law,  487.  —  1840. 
\^Rcportcd  herein  at  p.  501.]  ' 


§  189  BANK  OF  ROCHESTER  v.  GRAY.  [§  ii8J 

2  Hill  (N.  Y.),  227.  — 1842. 

Action  against  indorser.  Defence,  want  of  notice.  The  bill 
was  drawn  in  Rochester,  N.  Y.,  payable  in  Boston,  Mass.  It  was 
presented  by  a  notary  in  Boston  and  on  dishonor  a  certificate  of  pro- 
test was  drawn  up  in  due  form  stating,  among  other  things,  that  the 
notary  transmitted  notice  of  dishonor  to  the  drawer  and  indorsers, 

Anderson,  37  Mo.  91;  Carpenter  v.  Reynolds,  42  .Miss.  S07;  Hood  v.  Hallenbeek, 
7  Hun  (N.  Y.)  364;  Porter  v.  Kemball,  53  Barb.  (N.  Y.)  467;  Coddington  v.  Davis, 
I  N.  Y.  186.  — Ed. 

'  When  protest  is  necessary,  the  protest  fees  may  be  recovered  as  damages. 
Morgan  v.  Reintzel,  7  Cranch.  (U.  S.)  273;    Tieknor  v.   Branch  Bank,  3  Ala.  135. 

Where  protest  is  useless,  protest  fees  cannot  be  recovered.  German  v.  Ritchie. 
9  Kans.  106;  Woo/ley  V.  Fan  Volkenhurgh,  16  Kans.  20;  IVaddelP s  Succession,  44 
La.  Ann.  361.  Where  protest  is  proper,  but  not  necessary,  as  where  't  is 
authorized  by  statute  in  case  of  dishonor  of  an  inland  bill  or  a  promissory  note, 
protest  fees  may  be  recovered.  Leg'-v.  Vinal,  165  Mass.  555;  Merritt  v.  Ben- 
ton, 10  Wend.  (N.  Y.)  117;  2  Daniel  on  Neg.  Inst.,  §  933-  Contra:  Johnson  v. 
Bank,  29  Ga.  260;  i  Parsons  N.  &  B.  646.  —  Ed. 


v.]  PROTEST   AS   EVIDENCE.  569 

etc.      This  certificate   was  the   only   proof  of   notice    of   dishonor 
offered  by  plaintiff. 

By  the  Court,  Cowen,  J.  [After  deciding  that  a  notarial  seal 
stamped  directly  upon  the  paper,  without  the  use  of  a  wafer,  is  not 
a  good  common-law  seal.]  Suppose  the  protest  had  been  duly 
authenticated,  was  the  addition  of  a  certificate  stating  notice  of  pro- 
test to  the  defendant  admissible?  It  was  said  to  be  evidence  by 
Johnson,  J.  in  Cape  Fear  Bank  v.  Stinemetz  (i  Hill's  Law.  Rep.  S. 
Car.  45);  and  what  I  said  in  Halliday  v.  McDougall  (20  Wend.  85), 
is  now  relied  upon,  and  perhaps  rightly,  as  intimating  an  impression 
that  he  was  right.  The  point  decided  in  the  last  case  was,  however, 
that  the  giving  of  notice  being  the  usual,  not  official  duty  of  the 
foreign  notary,  and  he  being  dead,  the  entry  in  his  official  record 
of  notice  being  sent  might  be  received  by  way  of  memorandum  as 
secondary  evidence.  I  admitted  that  it  might  not  be  his  official  busi- 
ness; and  instituted  no  particular  examination  whether  it  was  or  not. 
The  learned  counsel  for  the  plaintiffs  has  not  been  able  to  furnish  any- 
thing mere  than  what  I  there  mentioned,  going  to  support  the  notary's 
certificate  as  evidence  of  notice.  I  have  been  equally  unsuccessful 
after  considerable  search.  On  the  contrary,  I  find  it  expressly 
asserted  in  Brooke's  Ofiice  of  Notary  (pp.  79  and  139),  that  the  giving 
of  notice  is  no  part  of  his  province  or  duty  as  notary.  In  the  late  case 
of  Fitter  v.  Morris  (6  Whart.  406,  415,  March  T.  1841),  this  very 
question  was  a  good  deal  considerd  by  the  supreme  court  of  Pennsyl- 
vania; and  they  held,  that  though  by  the  local  law  of  that  State,  the 
giving  of  notice  is  a  notarial  act,  and  on  that  ground  proveable  by 
his  certificate,  yet  this  is  an  exception  to  the  common  law.  They 
therefore  refused  to  receive  a  notarial  certificate  made  in  Alabama, 
as  evidence  of  notice,  or  anything  beyond  the  presentment  and  non- 
acceptance.  I  am  entirely  satisfied  that  such  is  the  law  of  England 
and  this  State. 

It  is  scarcely  necessary  to  observe,  that  our  statute  (Sess.  56,  p. 
395),'  relative  to  proof  of  notice  by  certificate,  applies  to  none  other 
than  notaries  of  this  State. ^ 

There  must  be  a  new  trial;   the  costs  to  abide  the  event. 

New  trial  granted.' 

'  L.  1833,  c.  271,  §  8.  Re-enacted  in  substance  in  N.  Y.  Code  Civ.  Proc. 
§  923.  —  Ed. 

^  It  is  now  provided  (Code  Civ.  Proc,  ^  925),  that  proof  of  dishonor,  and  notice 
of  dishonor,  of  an  instrument  payable  in  another  State  or  country,  may  be  made 
in  any  manner  authorized  by  the  law  of  the  State  or  country  where  it  is  payable. 
McAndre-v  v.  Radway^  34  N.  Y.  5";  Lawon  v.  Pimlcncy,  40  N.  Y.  Super.  Ct. 
187. —  Ed. 

3  A   notarial   certificate   is   not  competent   proof   of  service   of    notice    in  the 


570  NOTICE    OF   DISHONOR.  [ART.  VIII. 

absence  of  statute.  Real  Estate  Bank  v.  Bizzell,  4  Ark.  189;  Rives  v.  Parmley, 
18  Ala.  256;  Schneider  V.  Cochrane,  9  La.  Ann.  235;  Schorr  v.  IVoodlief,  23  La. 
Ann.  473;   Sivayze  v.  Britten,  17  Kans.  625. 

Statutes  now  generally  make  a  notarial  certificate /rz;«a /a«V  evidence  of  the 
giving  of  notice.  As  to  these  statutes  and  their  construction,  see  4  Am.  &  Eng. 
Encyc.  Law  (2nd  ed.),  pp.  389-393.  Where  a  notary's  certificate  may  include  a 
certificate  of  notice  of  dishonor,  such  certificate  of  notice  may  be  written  below 
the  body  of  the  certificate  and  even  below  the  seal.  Olcottv.  Tioga  R  Co.,  27 
N.  Y.  546;  Jordan  v.  Long,  109  Ala.  414.  —  Ed. 


ARTICLE  IX. 

Discharge  of  Negotiable  Instruments. 

I.  Disehapge  of  the  instpument. 

I.   Payment  and  Re-transfer. 

§  200  STODDARD   v.  BURTON.  [§  up] 

41  Iowa,  5S2.  —  1S75. 

Action  against  the  maker  on  a  lost  or  stolen  promissory  note 
payable  to  A,  or  bearer,  on  or  before  Jan.  6,  1868.  Defence,  pay- 
ment to  the  holder  (Thompson)   on  Oct.  11,  1866.     Judgment  for 

plaintiff. 

Day,  J.  .  .  .  The  defendant  asked  the  court  to  instruct  the 
jury  as  follows: 

12.  The  note  in  controversy  was  payable  on  or  before  a  certain 
date.  This  made  the  note  payable  at  a  fixed  time  absolutely,  and 
sooner  if  defendant  saw  fit  to  pay  it  sooner.  Such  were  the  express 
terms  of  the  contract,  and,  therefore,  no  presumption  of  bad  faith 
can  arise  from  the  simple  fact  that  defendant  paid  it  when  he  did, 
though  b}'  its  terms  payment  could  not  have  been  demanded  or 
enforced  at  the  time.  Defendant  had  the  right  to  pay  whenever  he 
chose  to  do  so." 

The  court  refused  this  instruction,  and  gave  the  following: 

"  8.  A  promissory  note,  payable  on  or  before  two  years  after  date, 
is  due  at  the  end  of  two  years  and  not  before;  the  rule  of  law  being 
that  the  note  becomes  due  at  the  time  when  the  payee  or  legal  holder 
or  owner  of  the  same  has  the  right  to  demand  payment,  and  this  is 
true,  although  the  note  provides  that  the  payor  may  at  his  oi)tion 
pay  the  same  before  the  time  fixed  when  it  shall  absolutely  becomes 
due." 

"  9.  The  payment  of  a  note  by  the  payor  before  it  becomes  due,  to 
a  stranger  who  may  have  possession  of  the  note,  will  not  protect  and 
discharge  the  maker,  if  said  note  has  been  stolen,  or  otherwise  sur- 
reptitiously come  into  the  hands  of  the  party  presenting  the  same." 

Other  instructions  given  embrace  the  same  doctrine. 

There  was  error  in  giving  these  instructions,  and  in  refusing  that 
asked.  The  note  was  payable  to  the  bearer,  and  there  is  a  pre- 
sumption that  the  person  in  possession  of  it,  and  who  presented  it 
for  payment,  was  the  owner.     It  has  been  declared  in  general  terms, 

[571] 


572  DISCHARGE   OF   INSTRUMENT.  [ART.    IX. 

that  the  payment  of  a  note  which  has  been  lost  or  stolen,  before  it 
is  due,  does  not  discharge  the  maker  from  liability  to  the  real  owner, 
because  the  payment  is  out  of  the  ordinary  course  of  business.  (2 
Parsons  on  Notes  and  Bills,  255,  and  cases  cited.)  ' 

But  the  note  in  question,  by  its  express  provisions,  at  the  option 
of  the  maker,  is  payable  at  any  time  within  two  years  from  its  date. 
Whilst  the  holder  could  not  enforce  payment  before  January  6,  1868, 
yet  the  maker  might  claim  the  right  to  make  payment  before  that 
time.  It  cannot  be  said  to  be  out  of  the  ordinary  course  of  business 
for  the  maker  to  insist  upon  a  provision  which  was  incorporated  for 
his  benefit.  No  presumption  against  the  bona  fides  of  the  defendant 
can  arise  from  the  time  of  making  payment. 

The  defendant  asked  the  court  to  instruct  in  substance  that,  if 
Burton  paid  the  note  to  Thompson  in  good  faith,  Thompson  being 
in  possession  of  it,  and  believing  him  to  be  the  owner,  without 
actual  notice  or  knowledge  that  it  was  stolen,  then  Burton  was  pro- 
tected by  such  payment,  and  that  mere  suspicion  on  Burton's  part 
as  to  Thompsons's  right  to  demand  payment  or  negligence  in  making 
inquiries  was  not  enough  to  invalidate  payment;  but  to  do  so,  it 
must  appear  that  Burton  had  acted  in  bad  faith.  The  court  refused 
this  instruction,  and  in  substance  directed  that  a  payment  made 
under  circumstances  that  would  put  a  reasonably  prudent  man  upon 
inquiry  as  to  Thompson's  right  to  receive  payment  would  not  pro- 
tect nor  discharge  defendant. 

This  action  was  erroneous.  Mere  suspicion  that  a  person  in  pos- 
session of  a  note  payable  to  bearer  may  not  be  the  owner,  will  not 
exonerate  the  maker  from  payment;  but  there  must  be  circumstances 
amounting  to  clear  proof  that  he  is  a  fraudulent  holder.^  {Story 
on  Prom.  Notes,  §  613,  and  cases  cited;  Gage  v.  Sharp,  24  Iowa, 
15;  Lake  v.  Reed,  29  Id.  258;  Goodman  v.  Sinionds,  20  How.  343;  i 
Parsons  on  Notes  and  Bills,  238;  2  Id.  212,  279.) 

For  the  errors  discussed,  the  judgment  is 

Reversed.' 

'  Disapproved  in  Bainbridgc  v.  City  of  Louisville,  83  Ky.  2S5.  —  Ed. 

'  See  g  95  [56].  —  Ed. 

3  See  §  148  [88].  cf.  Buehler  v.  McCormick,  (111.)  48  N.  E.  Rep.  287.  If  an 
instrument  is  paid  before  maturity  and  a  cancellation  legend  stamped  upon  it, 
and  it  is  afterwards  stolen,  the  cancellation  mark  effaced,  and  the  instrument 
put  into  circulation,  a  purchaser  for  value  without  notice  cannot  recover  on  it 
against  the  maker.     District  of  Cohmihia  v.  Cornell,  130  U.  S.    655. 

If  a  negotiable  instrument  is  lost  or  stolen  and  the  true  owner  duly  notifies 
the  maker,  the  latter  must,  at  his  peril,  make  sure  that  a  subsequent  payment 
is  to  a  holder  in  due  course.  Bainbridge  v.  City  of  Louisville,  83  Ky.  285;  Chap- 
pelear  v.  Martin,  45  Oh.  St.  126. 

If  payment  be  mid-"  *-  -^-^  — '■  ^  '^--  not  the  posse'^sion  of  the  instrument,  it 


I-  i-J  PAYMENT   AND    RETRANSFER.  573 

§  200        AGAWAM  XATIOXAL  BANK  z^  DOWNING.     [^  119J 

47  Northeastern  Rep.  (Mass.),  1016.  —  1897. 

Action  against  Edward  B.  Downing  as  maker  of  a  note.  After 
the  note  matured,  plaintiff  took  a  new  note  for  $450  from  the 
indorser,  William  B.  Downing,  which  included  the  amount  of  the 
note  in  suit  and  another  note  of  $200  given  by  X.  Plaintiff  retained 
possession  of  the  note  in  suit  and  said  note  of  $200. 

MoRTo;'/,  J.  —The  defendant  is  the  maker  of  the  note  in  suit. 
As  between  him  and  William  B.  Downing,  the  indorser,  it  was  an 
accommodation  note.  But  there  is  nothing  to  show  that  this  was 
known  to  the  plaintiff,  or  that  it  took  the  note  otherwise  than  in 
good  faith  and  for  value.  Whether  the  $450  note  operated  as  pay- 
ment of  it  was  a  question  of  fact  depending  on  the  intention  of  the 
parties,  and  the  other  circumstances  surrounding  the  transaction. 
[Brigham  v.  Lally,  130  Mass.  485;  Dodge  v.  Emerson,  131  Mass.  467; 
Green  v.  Russell,  132  Mass.  536;  Eanicsx.  Cushman,  135  Mass.  573; 
Woods  V.  Woods,  127  Mass.  141;  Cotton  v.  Bank,  145  Mass.  45,  12 
X^  E.  850.)  The  court  must  have  found  that  it  did  not,  and  its 
finding  is  conclusive.  {Brigham  v.  Lally,  supra.)  There  was  noth- 
ing, we  think,  in  the  arrangement  between  the  plaintiff  and  William 
B.  Downing  that  operated  to  release  the  defendant.  His  liability  to 
the  plaintiff  was  an  absolute  one.  Delay  on  its  part  to  enforce  pay- 
ment, from  whatever  motive,  or  however  long  continued,  if  not  for 
six  years,  would  not  release  him.  We  do  not  see  that  the  case  is 
altered  because  the  delay  was  at  the  request  of  the  indorser,  and 
accompanied  by  an  agreement  between  the  plaintiff  and  him  that 
the  defendant's  overdue  note  should  be  regarded  as  security  for  the 
new  note  given  by  William  B.  Downing. 

Exceptions  overruled.' 

is  at  the  peril  of  the  payor.  Wheeler  v.  Guild,  20  Pick.  (Mass.)  545.  So  also, 
it  seems,  if  the  one  to  whom  payment  is  made  does  not  actually  produce  the 
instrument.  Murphy  v.  Barnard,  162  Mass.  72.  See  also  Wilcox  v.  Aultman 
64  Ga.  544;  University  Bank  v.  Tuck,  96  Ga.  465.  If  the  instrument  is  indorsed 
In  full,  payment  to  any  one  except  the  indorsee  (even  to  one  in  possession  of 
the  instrument)  is  at  the  peril  of  the  payor.  Doubleday  v.  Kress,  50  N.  Y. 
410.  —  Ed. 

'  Whether  a  renewal  note  is  taken  in  payment  of  the  former  note,  or  merely  in 
extension  of  the  obligation  of  the  former  note,  is  a  question  of  the  intention  of 
the  parties.     Matter  of  Utica  National  Brewing  Co.,  154  N.  Y.  268.  —  Ed. 


574  DISCHARGE   OF   INSTRUMENT.  [ART.  IX. 

§  200  MADISON  SQUARE  BANK  v.  PIERCE.  [§  119J 

137  New  York,  444.  —  1893. 

Action  on  a  promissory  note.  Defence,  part  payment  by  indorser. 
Judgment  for  plaintiff. 

Finch,  J.  — We  have  a  novel  and  interesting  question  before  us 
on  this  appeal,  although  its  apparent  importance  will  lessen  as  we 
pass  from  first  impressions  to  some  slower  reflection.  It  arises  upon 
facts  which  are  very  brief  and  simple  and  may  at  once  be  stated. 
The  defendant,  Pierce,  made  his  promissory  note  payable  to  his  own 
order  and  indorsed  it  to  the  Bates  Co.,  Limited,  which  indorsed  it 
to  the  plaintiff  bank;  the  latter  discounting  it  and  paying  the  pro- 
ceeds over  to  the  immediate  indorser.  Thereafter  the  Bates  Co. 
became  insolvent  and  passed  into  the  hands  of  a  receiver,  who  paid 
to  the  bank  upon  the  liability  of  the  indorser  seventy-three  and  one 
quarter  per  cent,  of  the  amount  secured  by  the  note.  Later,  the 
bank  sued  Pierce,  the  maker,  and  recovered  judgment  for  the  full 
amount  of  the  note  in  spite  of  the  proof  showing  the  payment  made 
by  the  receiver,  and  in  disregard  of  the  claim  asserted  by  the  defend- 
ant that  he  should  only  be  held  liable  for  the  balance  remaining 
unpaid.  That  judgment  has  been  affirmed  by  the  General  Term, 
Judges  Daniels  and  Barrett  each  writing  very  strong  and  valuable 
opinions  in  support  of  their  doctrine,  and  relying  upon  the  authority 
of  yoncs  V.  Broadhurst  (9  M.  G.  &  S.  177;  67  Eng.  Com.  L.  175), 
which  fully  warrants  their  conclusion.  The  question  does  not  seem 
ever  before  to  have  arisen  in  this  country,  and  we  are  left  at  liberty 
to  examine  the  English  rule  and  to  follow  it  or  not  as  we  approve  or 
disapprove  its  logic  and  its  consequences. 

AVe  are  not  to  regard  the  note  as  being  accommodation  paper,  but 
must  assume  its  transfer  for  value.  The  form  of  the  transaction  is 
equivalent  to  what  it  would  have  been  if  the  Bates  Co.  had  been 
named  as  payee,  and  loses  none  of  its  force  by  the  intervention  of 
the  maker  as  first  indorser.  That  indorsement,  in  the  form  adopted, 
was  needed  for  the  regular  transfer  of  title,  but  does  not  change  or 
affect  the  nature  and  character  of  the  maker's  liability.  He  remains 
the  ultimate  debtor,  the  person  who  ought  to  pay  the  debt,  in  prefer- 
ence to  and  in  exoneration  of  all  the  other  parties  to  the  paper,  who 
in  some  form  or  other  are  entitled   to  have  final  recourse  to  him. 

And  it  is  to  the  case  of  such  a  maker  of  the  note  or  such  an 
acceptor  of  the  bill  of  exchange  that  the  English  rule  alone  applies; 
and  it  is  explicitly  declared  inapplicable  where  the  indorser  or 
drawer  is  the  real  debtor,  although  in  form  only  secondarily  liable. 

Pierce,  therefore,  was  the  ultimate  debtor,  and  the  party  who  ought 


I.  I.]  PAYMENT  AND  RETRANSFER.  5/5 

to   pay   the  note,  both   in  discharge  of  the  obligation  to  the  holder 
and  in   exoneration  of  the  indorser.     When  the  bank  sued  on  the 
note,  it  was  the  legal  holder  and  the  legal  party  in  interest.     Upon 
production  of  the  paper  and  the  usual  proof,  judgment  against  the 
maker  for  the  full  amount  was  inevitable,  unless  some  defence  should 
be  interposed.      The  only  possible  one  for  Pierce  was  part  payment, 
and  he   was   compelled  to  assert,  and  his  counsel  are  compelled  to 
argue,  that  the  money  paid  by  the  indorser  to  the  holder  inured  to 
the  benefit  of  the  maker  as  a  payment  on  his  debt.     But  that  doc- 
trine cannot  prevail  for  very  obvious  reasons.     The  indorser 's  pay- 
ment did   not  in  the  least  lessen  or  satisfy  the  maker's  debt.     He 
owed  it  all  exactly  as  before.     What  had  happened  possibly  changed 
somewhat  the  real  creditor,  but  left  the  whole  debt  due  and  unpaid. 
To  whom   he  should   pay  might   become  a  new  question,  but  how 
much  he  should  pay  in  discharge  of  the  note  was  not  made  doubtful 
in    any    degree.       What    the   receiver   advanced    to    the    holder   is 
familiarly  described  as  a  payment;  but  it  was  such  relatively  to  the 
indorser's  liabiUty  alone;  while  relatively  to  the  obligation  of  the 
maker,  it   was  an  equitable  purchase  instead  of  a  payment.     That 
view   of   it  was  taken  in  a  very  early  case,   the  decision  of  which 
depended  necessarily  upon  it.     In  Callow  v.  Lawrence  {3  Mau.  &  Sel. 
95),  it   appeared  that  one  Pywell  drew  a  bill  upon  Lawrence  to  his 
own  order,  which  Lawrence  accepted.     The  drawer  indorsed  the  bill 
to  Taylor,  who  discounted  it  and  thereafter  indorsed  it  to  Earnett. 
It  was  protested  for  non-payment.     The  drawer  paid  Barnett  the  full 
amount  and  took  the  bill,  and,  striking  off  the  indorsements  of  Tay- 
lor and  Barnett,  transferred  the  bill  to  Callow,  who  sued  the  acceptor 
upon  it.      The  latter  claimed  that  the  bill  was  paid  and  extinguished, 
which  the  court  denied,  saying  that  the  drawer  "became  the  pur- 
chaser of  the  bill  •'  when  he  paid  and  took  it  up  out  of  Barnett's 
hands;  that  it  was  not  paid  by  the  drawer,  animo  solvendi,  in  order  to 
extinguish  it,  but  only  to  redeem  himself  from  the  situation  in  which 
he   stood.       That  must  always  be  true  of  payment  by  indorser  to 
holder,  where  the  maker  is  the  ultimate  debtor.     To  the  extent  of 
the  money  paid,  the  indorser  becomes  equitably  entitled  to  be  sub- 
stituted to  the  rights  and  remedies  of  the  holder,  and  becomes,  J^ro 
tanto,  the   beneficial  owner  of  the  debt;  so  that  the  maker's  obliga- 
tion   to   pay  the  note  in  full,  at  first  due  to  the  holder  solely  in  his 
own    right,    becomes,   after  the  part  payment  by  the  indorser,  still 
wholly  due   to  the  holder,  but  partly  in  his  own  right  and  partly  as 
trustee  for   the  indorser.     A  court  of  law  cannot  split  the  note  into 
parts,  and  must  act  upon  the  legal  interest  and  ownership. 

In    the    present  case   there   was   no    privily  between   maker  and 


5/6  DISCHARGE   OF   INSTRUMENT.  [ART.   IX. 

indorser  as  it  respects  the  action  of  the  latter.  He  paid  not  as  the 
agent  of  the  maker,  not  at  his  request,  not  for  his  benefit,  and 
under  no  duty  to  relieve  him,  but  independently,  upon  his  own  obli- 
gation, to  lessen  his  own  responsibility,  and  not  at  all  to  discharge 
the  ultimate  debt  which  it  was  the  maker's  duty  to  pay.  It  seems 
very  clear,  therefore,  that  the  maker  cannot  utilize  for  his  own 
benefit  a  payment  which,  as  to  him,  is  not  a  payment  upon  the  debt. 
It  becomes,  as  I  have  said,  merely  a  question  to  whom  he  shall  pay 
and  who  may  sue  for  and  collect  the  whole  unpaid  sum.  In  that 
question  the  maker  has  no  concern  beyond  the  inquiry  whether  he 
may  become  liable  to  different  persons  for  the  same  debt  and 
encounter  the  danger  of  paying  it  twice.  I  can  discover  no  such 
peril.  The  judgment  in  favor  of  the  holder  is  a  bar  to  any  other 
suit  on  the  same  note,  and  payment  to  the  holder  discharges  the 
note  utterly.  Ordinarily,  the  indorser  cannot  recover  except  upon 
the  note  and  as  holder  and  in  accordance  with  the  law  merchant. 
If  he  ever  has  any  other  right  of  action  against  the  maker,  it  is  either 
in  equity  or  by  force  of  some  facts  beyond  the  bare  relation  estab- 
lished by  the  paper.  And  where  the  note  is  merged  in  the  holder's 
judgment  or  paid  in  full  to  him  by  the  maker,  the  indorser's  only 
right  is  through  the  judgment  or  against  the  proceeds,  if  he  has 
made  a  partial  payment  to  the  holder.  That  does  the  indorser  no 
wrong.  If  he  is  not  content  that  the  holder  shall  collect  to  some 
extent  as  his  trustee,  he  may  prevent  it  by  payment  in  full  to  the 
holder  and  so  entitle  himself  to  the  possession  of  the  note  on  which 
to  sue,  or  if  judgment  has  been  obtained,  to  be  subrogated  to  all  of 
the  rights  of  the  plaintiff  therein. 

I  think  this  result  is  clearly  indicated  by  our  own  decisions.  In 
Mechanic^  Bank  v.  Hazard  (13  John.  353),  the  maker  of  the  note 
had  been  arrested  in  an  action  upon  it  and  his  bail  sought  to  relieve 
themselves  by  force  of  a  payment  made  by  the  indorser  to  the 
holder,  but  such  effect  was  denied  to  it;  the  court  saying  that  it 
was  not  a  payment  by  or  on  behalf  of  the  maker,  or  of  which  he  or 
his  bail  could  avail  themselves.  And  in  Guernsey  v.  Burns  (25  Wend. 
411),  where  the  suit  was  by  the  holder,  representing  the  legal  title 
and  interest,  it  was  said  to  be  no  defence  to  the  maker  and  no  con- 
cern of  nis  that  some  property  in  the  note  was  in  another. 

It  thus  becomes  apparent  that  there  is  no  very  great  importance 
in  the  question  which  method  of  securing  payment  from  the  maker 
is  adopted  since  the  same  result  follows  from  each,  and  that  it  narrows 
down  to  the  inquiry  whether,  as  matter  of  correct  doctrine  and  of 
convenience  in  practice,  the  holder  may  recover  the  whole  debt 
ao-ainst  maker  or  acceptor  for  himself  and  as  trustee  for  the  indorser 


I.   I.]  PAYMENT  AND    RETRANSFER.  577 

to  the  extent  of  his  acquired  interest;  or  whether  he  shall  take  judg- 
ment only  for  the  balance,  leaving  the  indorser  to  sue  in  some  way 
and  on  some  theory,  which  apparently  could  not  be  upon  the  note 
because  already  merged  in  the  judgment,  but  might  be  for  money 
paid  for  the  use  of  the  maker  since  he  gets  the  benefit  of  it  in  the 
reduction  of  the  judgment,  as  was  held  in  Pownal  v.  Ferrand  (6  B. 
&  Cress.  439),  where  the  holder  deducted  the  indorser's  payment 
from  the  levy  against  the  maker.  The  former  seems  to  me  to  be 
the  logical  and  convenient  method  and  so  I  think  we  should  follow 
the  English  doctrine. 

I  have  not  underrated  the  assault  made  upon  it  by  the  appellant. 
He  asserts  that  yones  v.  BroadJiurst  is  contrary  to  the  earlier  cases 
and  has  been  criticised  and  shaken  by  the  later  ones.  I  have 
examined  them  all,  with  some  wonder  at  the  amount  of  learning  and 
ingenuity  expended  upon  the  subject.  [Pierson  v.  Dunlop^  Cowper, 
571;  Walwyn  v.  St.  Quiiitin,  i  Bos.  &  P.  652;  Bacon  v.  Scarles,  i  H. 
Bl.  88;  Hemming  \.  Brook,  i  Car.  &  M.  57;  Randall  v.  Moon,  12  C. 
B.  261;  Cook  v.  Lister,  13  C.  B.  [N.  S.]  543;  Solomon  v.  Davis,  i 
Cahabe  &  Ellis,  83;  Thornton  v.  Maynard,  10  Com.  PI.  L.  R.  695.) 
The  prior  cases  were  very  fully  and  carefully  reviewed  by  Baron 
Cresswell  in  the  opinion  rendered  in  Jones  v.  Broadhurst,  and  of  the 
subsequent  cases  I  deem  it  only  necessary  to  say,  that,  along  with 
some  criticism  and  occasional  doubt,  the  doctrine  has  remained  sub- 
stantially unshaken,  and  the  case  last  cited  was  declared  by  Lord 
Coleridge  to  be  the  accepted  law. 

It  must  not  be  forgotten,  however,  and  I  may  prudently  repeat, 
that  the  doctrine  has  no  application  to  accommodation  paper,  and 
rests  wholly  upon  the  actual  and  ultimate  indebtedness  of  maker  or 
acceptor  as  the  party  who  ought  to  pay.  In  such  a  case  as  that, 
which  correctly  describes  the  one  now  before  us,  and  where  no  dis- 
turbing facts  affect  the  relations  of  the  parties  as  fixed  by  the  paper 
itself,  I  think  the  holder  may  sue  and  recover  the  full  amount,  receiv- 
ing so  much  of  the  proceeds  as  represents  a  part  payment  by  the 
indorser  as  trustee  for  him. 

It  follows  that  the  judgment  should  be  affirmed,  with  costs. 

All  concur,  except  Maynard,  J.,  dissenting. 

Judgment  affirmed.' 


1  Payment  for  honor  must  also  be  distinguished.     See  Neg.  Inst.  L..  i^§  300- 
306  [171-177]-  —  Ed. 

xegot.  instruments — 37. 


578  DISCHARGE    OF   INSTRUMENT.  [ART.    IX. 

§  200  LANCE Y  V.  CLARK.  [§  119] 

64  New  York,  209.  —  1876. 

Action  by  holder  against  maker.  Judgment  for  plaintiff  at 
circuit.      Judgment  reversed  at  General  I'erm.      Plaintiff  appeals. 

Earl,  J.  — The  defendant  made  the  note  in  suit  for  the  benefit 
and  accommodation  of  the  firm  of  Lambert  and  Lincoln.  It  was  dis- 
counted and  the  proceeds  passed  to  their  credit  by  the  North  River 
Bank.  Each  member  was  therefore  bound,  as  to  the  maker,  to  pay 
the  note,  and  thus  save  him  from  liability  on  account  thereof. 
Before  the  note  became  due  the  firm  was  dissolved,  and  Lincoln  was 
to  close  up  its  business.  Plaintiff  lived  in  Canada,  and  Lincoln 
wrote  him,  requesting  him  to  take  up  the  note  and  furnish  the 
money  for  that  purpose.  Plaintiff,  a  few  days  before  the  maturity 
of  the  note,  sent  Lincoln  the  money,  which  he  placed  in  the  bank  to 
his  individual  credit.  On  the  day  the  note  fell  due  he  went  to  the 
bank,  and,  by  his  individual  check,  paid  the  note  to  the  discount 
clerk,  who  knew  at  the  time  that  it  was  an  accommodation  note. 
He  did  not  assume  to  act  as  agent  for  any  one,  and  did  not  ask 
to  have  the  note  transferred  to  any  one,  and  did  not  mention 
plaintiff's  name  in  any  way.  It  is  true  that  he  asked  to  have  the 
note  protested  so  that  he  could  hold  the  indorser  and  maker,  but  he 
did  not  disclose  why  he  wanted  to  hold  them.  After  he  had  thus 
paid  and  taken  it,  he  sent  it  to  the  plaintiff. 

Upon  such  a  state  of  facts,  did  plaintiff  take  his  title  from  the 
bank  or  from  Lincoln?  If  he  took  it  from  the  bank,  he  took  the 
place  of  the  bank,  and  his  title  and  right  to  enforce  it  were  as  good 
as  those  of  the  bank  at  the  time  he  took  it.  But  if  he  took  it  from 
Lincoln,  it  being  past  due,  he  took  it  subject  to  any  defence  defen- 
dant could  have  made  if  sued  by  Lincoln,  and  in  such  case  defen- 
dant's defence  would  have  been  perfect.  He  could  not  be 
successfully  sued  by  either  of  the  persons  for  whose  accommodation 
he  made  the  note. 

Plaintiff  did  not  take  title  from  the  bank.  It  matters  not  that  he 
furnished  the  money,  and  that  Lincoln  promised  to  use  it  in  taking 
up  this  note  for  him.  It  matters  not  that  the  note  was  protested  so 
that  the  indorser  and  maker  could  be  held,  or  that  the  bank  did  not 
intend  absolutely  to  discharge  and  cancel  the  note.  The  question 
is,  did  the  bank  transfer  or  sell  the  note  to  the  plaintiff?  To  make 
a  sale  or  transfer  takes  two  parties,  one  to  sell  and  the  other  to  buy, 
and  the  bank  could  not  be  made  a  seller  without  its  knowledge  or 
consent.  It  was  not  bound  to  sell  or  transfer  the  note.  All  it  was 
bound  to  do  was  to  surrender  it  upon  payment  by  the  person  liable 


I    2.]  CANCELLATION   OR   RENUNCL\TION.  579 

to  pay  it.  A  seller  in  such  a  case  incurs  some  obligation  by  the 
sale,  although  he  does  not  indorse  the  paper.  He  impliedly  warrants 
that  the  paper  is  genuine  and  all  it  purports  to  be  on  its  face,  and  he 
cannot  be  drawn  into  this  implied  warranty  without  his  consent. 
(^Eastman  v.  Plumer,  32  N.  H.  238;  Delaware  Bank  v.  yarvis,  20 
N.  Y.  226;  Morrison  Y.  Currie,  4  Duer,  79;  Aldrich  v.  J^ackson,  5  R.  I. 
218;  2  Parsons  on  Notes  and  Bills,  2d  ed.  37.)  All  the  bank  did  in 
this  case  was  to  take  payment  of  the  note,  and  deliver  it  up  to  a 
party  paying  and  liable  to  pay,  after  protesting  it,  so  that  he  could 
make  such  use  of  it  as  the  law  and  the  facts  would  authorize.  It  did 
not  transfer  or  intend  to  transfer  it.  The  plaintiff,  therefore,  took 
no  title  to  it  from  the  bank,  but  he  took  it  from  Lincoln,  and  can- 
not, therefore,  enforce  it  against  the  defendant. 

The  order  of  the  General  Term  must,  therefore,  be  affirmed,  and 
judgment  absolute  ordered  against  the  plaintiff,  with  costs.  All 
concur. 

Order  affirmed  and  judgment  accordingly.' 


2.   Cancellation  or  Renunciation 

§  203  LARKIN  V.  HARDENBROOK.  [§  122] 

go  New  York,  333.  —  1S82. 

This  action  was  brought  to  recover  the  amount  of  a  promissory 
note  executed  by  defendant  to  Isaac  C.  Loper,  plaintiff's  testator, 
which  the  complaint  alleged  had  been  lost  or  destroyed. 

The  referee  found  that  said  Loper  executed  to  defendant  a  deed 
of  certain  premises,  and  in  consideration  thereof,  the  note  in  suit 
was  executed,  and  delivered   to  the  grantor,  who  thereafter  volun- 

'  If  an  instrument  is  retransferred  to  the  maker  or  acceptor  at  or  after  matu- 
rity, the  transaction  is  treated  as  a  payment,  and  the  instrument  cannot  be 
reissued  or  negotiated.  Harjner  v.  Steele,  4  Exch.  Rep.  i ;  Ballard  v.  Greeiibush, 
24  Me.  336;  Ferree  v.  New  York,  etc.  Co.,  74  Fed.  Rep.  769.  But  if  it  be  trans- 
ferred to  the  maker  or  acceptor  before  maturity,  the  transaction  may  be  shown 
to  be  a  purchase  and  not  a  payment  and  the  instrument  may  be  re-issued. 
Atteiiborough  v.  Mackenzie,  25  L.  J.  Ex.  244;  Rogers  v.  Gallagher,  49  III.  182; 
West  Boston  Bank  v.  Thompson,  124  Mass.  506;  Swope  v.  Ross,  40  Pa.  St.  186; 
Eckert  V.  Cameron,  43  Pa.  St.  120.  Contra:  Long  v.  Cynthiana  Bank,  i  Litt. 
(Ky.)  290;    Stark  v.  Alford,  49  Tex.  260. 

If  an  instrument  is  retransferred  to  one  of  two  or  more  joint  makers,  before 
maturity,  and  re-issued  by  him,  it  seems  that  his  transferee  gets  only  a  right 
of  contribution  against  the  other  joint  makers.  The  case  is  distinguished  from 
that  of  a  single  promisor.  Ste-ocns  v.  IlauHan,  86  Mich.  305;  S.  C,  88  Mich.  13; 
Knejlandx.  Miles    (Tex.)  24  S.  W.  Rep.  1113.  —  Eu. 


58o  DISCHARGE    OF    IXSTRU.MENT.  [ART.    IX. 

tarily    and  intentionally  canceled,   destroyed,   and  surrendered    up 
the  same  to  the  defendant. 

Miller,  J. — The  note  described  in  the  complaint  was  given  by 
the  defendant  to  the  plaintiff's  intestate,  upon  the  conveyance  to 
him  of  certain  real  escate,  and  as  a  consideration  therefor,  on  the 
nth  day  of  October,  1S70.  The  referee  before  whom  the  trial  was 
had  has  found  that  in  or  about  the  month  of  Januarv,  187 1,  the  grantor 
voluntarily  and  intentionally  canceled,  destroyed,  and  surrendered 
up  to  the  defendant  said  security  and  note,  and  as  a  conclusion  of 
law,  the  intestate  discharged  the  defendant  thereon,  and  that  no 
recovery  could  be  had  either  on  the  note  or  on  the  original  con- 
sideration. We  think  that  the  finding  of  fact  by  the  referee  is  suffi- 
ciently supported  by  the  evidence,  and  that  the  conclusion  arrived 
at  was  the  legal  and  necessary  result  of  said  finding.  The  rule 
seems  to  be  well  settled  by  the  authorities  that  where  an  obligee 
delivers  up  the  obligation  which  he  holds  against  another  party, 
with  the  intent  and  for  the  purpose  of  discharging  the  debt,  where 
there  is  no  fraud  or  mistake  alleged  or  proven,  that  such  surrender 
operates  in  law  as  a  release  and  discharge  of  the  liability  thereon; 
nor  is  any  consideration  required  to  support  such  a  transaction  when 
it  has  been  fully  executed.  (Bouv.  Law  Diet.,  title  Release;  Albert's 
Ex'rs  V.  Ziegler's  Ex'rs,  29  Penn.  St.  50;  Beach  v.  Endress^  51  Barb. 
570;  Doty  V.    Wilson.,  5  Lans.  10.) 

Tliere  certainly  could  not  be  higher  evidence  of  an  intention  to 
discharge  and  cancel  a  debt  than  by  a  destruction  and  surrender  of 
the  instrument  which  created  it,  to  a  party  wdio  is  liable  by  virtue 
of  the  same. 

Judgment  affirmed. 


>;  203  SLADE  V.  MUTRIE.  [§  122] 

156  Massachusetts,  19.  —  1892. 

Action  to  recover  the  balance  of  a  promissory  note.  The  defend- 
ant paid  the  plaintiffs  $125  and  received  a  receipt  "  in  full  settle- 
ment of  all  accounts  to  date,"  and  the  note.  Charge:  That  if  the 
plaintiffs  surrendered  the  note  to  be  canceled  intending  to  give  the 
defendant  the  balance  of  the  debt,  plaintiffs  could  not  recover;  but 
if  the  note  was  delivered  in  order  that  defendant  might  exhibit  it 
and  upon  defendant's  promise  to  pay  the  balance,  plaintiffs  could 
recover. 

The  jury  returned  a  special  finding  that  the  plaintiffs  intended  to 
receive  the  one  hundred  and  twentv-five  dollars  "  in  full  for  the  debt 


I.  2.]  CANXELLATION    OR   RENUNCIATION.  58 1 

then  due,"  and  further  returned  a  general  verdict  for  the  defendant; 
and  the  plaintiffs  alleged  exceptions. 

Field,  C.  J.  — The  counsel  for  the  defendant  concedes  that,  by 
the  law  of  this  Commonwealth,  the  payment  of  a  part  of  a  debt  after 
the  whole  debt  has  become  payable  is  not  a  sufficient  consideration 
to  support  a  promise  not  under  seal  to  discharge  the  remainder  of 
the  debt.  {^Brooks  v.  JF/n'te,  2  Met.  283;  Harriman  v.  Harn'man, 
12  Gray,  341;  Potter  v.  Green,  6  Allen,  442;  Griniiell  v.  Spink,  12S 
Mass.  25;  Lathrop  v.  Page,  129  ]\Iass.  19;  Tyler  v.  Odd  Fellows' 
Relief  Association,  145    Mass.    134,  137;  Foakes  v.  Beer,  9  App.  Cas. 

605.) 

The  jury,  in  returning  a  general  verdict  for  the  defendant,  must 
have  found  on  the  judge's  charge  that  the  note  was  surrendered  by 
the  plaintiffs  to  the  defendant  that  it  might  be  canceled,  and  that 
the  plaintiffs  intended  by  delivering  the  note  to  the  defendant  to 
give  him  the  note  and  discharge  the  remainder  of  the  debt. 

For  certain  purposes,  a  bill  of  exchange  or  a  promissory  note  is 
regarded  in  this  Commonwealth,  not  merely  as  evidence  of  a  debt, 
but  as  the  representative  of  a  debt,  or  the  debt  itself.  Each  may 
be  the  subject  of  a  gift,  but  to  constitute  a  gift  there  must  be  a 
delivery  by  the  owner  to  the  donee,  with  the  intention  of  passing 
the  title.  i^Grover  v.  Grover,  24  Pick.  261;  Sessions  v.  Moseley,  4 
Cush.  87;  Bates  v.  Kempton,  7  Gray,  382;  Chase  v.  Redding,  13  Gray, 
418.  See  Sheedy  v.  Roach,  124  Mass.  472;  Pierce  v.  Boston  Five  Cetifs 
Savings  Bank,  129  Mass.  425;  Taft  v.  Bowker,  132  Mass.  277; 
McCann  v.  Randall,  147  Mass.  81;  Cochrane  v.  Moore,  25  Q.  B.  D. 
57;   Gammon  Theological  Son.  v.  Robin ns,  128  Ind.  85.) 

It  follows  from  this,  that  the  delivery  of  a  promissory  note  by  the 
holder  to  the  maker,  with  the  intention  of  transferring  to  him  the 
title  to  the  note,  is  an  extinguishment  of  the  note,  and  a  discharge 
of  the  obligation  to  pay  it.  [Ilalex.  Rice,  124  Mass.  292;  Stewart 
V.  Hidden,  13  Minn.  43;  Ellsworth  v.  Fogg,  35  Vt.  355;  Vanderbcck 
V.   Vanderbeck,  3  Stew.  265;  Joffrayv.  Davis,  124  N.  Y.  164,  170.) 

Exceptions  overruled.' 


1  See  the  provisions  of  g  62,  subsec.  i  of  the  Bills  of  Exchange  Act,  (corre- 
sponding to  §  203  [122]  of  the  Neg.  Inst.  L.),  construed  in  Edwards  v.  Walters, 
i8q6,  2  Ch.  157,  where  it  was  held  that  a  delivery  to  the  devisee  of  the  maker 
was  not  a  delivery  to  the  maker,  though,  semblc,  a  delivery  to  the  executor  or 
administrator  would  be.  —  Ed. 


582  DISCHARGE   OF   INSTRUMENT.  [ART.  IX. 

§  204  LYNDON VILLE    NATIONAL    BANK    v.         [§  123] 

FLETCHER. 

63  Vermont,  81.  —  1895. 

Action   against  a  surety   on   a  promissory  note.     Judgment  for 
plaintiff. 

RowELL,  J.  —  Tlie  defendant  was  surety  for  Walter  on  a  second 
renewal  note  to  the  plaintiff  bank.  Walter  had  put  $20,000  of  securi- 
ties into  the  defendant's  hands,  in  consideration  of  which  he  agreed 
to  and  did  indorse  for  him  to  that  amount,  of  which  said  note  was  a 
part.  The  bank  knew  that  the  defendant  was  surety,  but  did  not 
know  that  he  had  security.  Said  note  was  taken  up  by  a  note  that 
Walter  sent  to  the  bank,  signed  by  him  and  purporting  to  be  signed 
by  the  defendant,  but  on  which  he  had  forged  the  defendant's  name. 
There  were  several  like  forged  renewals,  but  the  defendant  had  no 
knowledge  of  any  of  them  till  the  bank  notified  him  of  the  approach- 
ing maturity  of  the  last  one  and  informed  him  that  it  would  not  be 
renewed;  whereupon  he  went  to  the  bank,  saw  the  note,  pronounced 
his  name  thereon  a  forgery,  and  refused  to  pay  it,  and  thereupon,  at 
its  maturity,  this  suit  was  brought  thereon  and  on  the  three  genuine 
notes  and  another  of  the  forged  renewals. 

When  the  last  genuine  note  was  thus  taken  up,  the  bank  stamped 
it  "  Paid,"  and  sent  it  to  Walter,  who  carried  it  to  the  defendant, 
who,  when  he  saw  it,  was  thereby  induced  to  believe  and  did  beUeve 
that  it  was  paid  and  extinguished  and  he  released  therefrom,  and 
thereupon,  relying  on  that  belief,  he  signed  another  note  for  Walter 
for  the  same  amount,  which  otherwise  he  would  not  have  done,  and 
whereby  he  was  damnified. 

The  defendant  never  had  an)^thing  to  do  with  the  bank  concerning 
any  of  the  notes  except  as  aforesaid,  but  the  business  was  all  done 
by  Walter. 

The  defendant  conceded  that  the  bank  believed  the  forged  renew- 
als were  genuine,  and  acted  upon  that  belief  in  taking  them,  and 
otherwise  would  not  have  taken  them;  but  he  claimed  that  the 
cashier  was  negligent  in  taking  the  first  forged  renewal  and  stamp- 
ing and  giving  up  as  paid  the  last  genuine  renewal,  for  that  the 
forgery  was  so  manifest  that,  as  a  careful  and  prudent  man,  with  both 
notes  before  him,  he  ought  to  have  detected  it;  and  he  asked  to  go 
to  the  jury  on  that  question,  claiming  that  if  the  negligence  was 
found,  the  plaintiff  would  be  thereby  estopped  from  recovery  on  the 
last  genuine  note. 

The  defendant  also  claimed  that  by  stamping  said  last  mentioned 
note   "Paid"   instead    of   "Renewed,"  as    the  fact  was,  the  bank 


I-  -■]  CANCELLATION   OR    RENUNCIATION.  583 

made  a  false  statement,  to  its  knowledge,  and  that  when  it  sent  the 
note  to  Walter  thus  stamped,  it  ought  to  have  known  that  he  would 
show  it  to  the  defendant,  and  that  the  defendant  would  be  thereby 
induced  to  believe  it  was  paid  and  extinguished,  and  to  act  accord- 
ingly, to  his  prejudice,  or,  at  least,  that  it  ought  to  have  known  that 
such  would  naturally  and  probably  be  the  fact,  and  that  if  the  jury 
should  find  that  the  bank,  in  the  exercise  of  the  requisite  care  and 
prudence,  ought  to  have  so  known,  then  what  it  did  in  this  behalf 
amounted  to  a  representation  by  it  to  the  defendant  that  the  note 
was  in  fact  paid  and  extinguished;  and  if  it  was  further  found  that 
the  defendant  acted  upon  that  representation  to  his  prejudice,  the 
plaintiff  would  be  estopped  from  recovery  on  that  note. 

The  defendant  further  claimed,  that  if  the  parties  are  to  be 
regarded  as  equally  innocent  in  the  matter,  and  the  taking  of  the 
first  forged  renewal  and  the  stamping  and  giving  up  as  paid  of  the 
genuine  renewal  were  a  mere  mistake  on  the  part  of  the  bank,  then 
the  loss  must  still  rest  upon  the  plaintiff,  which  made  the  mistake, 
and  on  which  the  chances  of  business  have  placed  it. 

But  the  court  ruled  against  the  defendant  on  all  his  claims,  and 
directed  a  verdict  for  the  plaintiff  for  the  amount  of  the  last  genuine 
renewal,  to  which  the  defendant  excepted;  and  he  now  makes  sub- 
stantially the  same  claim  that  he  made  below. 

It  was  undoubtedly  the  duty  of  the  bank  to  act  in  good  faith 
towards  the  defendant  in  the  matter,  but  it  was  under  no  further 
duty  to  him.  {Bank  of  Newbury  v.  Richards',  35  Yt.  281,  284.)  The 
presentation  by  Walter  of  the  first  forged  renewal  was  a  representa- 
tion by  him  that  it  was  genuine,  and  the  bank,  certainly  with  noth- 
ing to  arouse  its  suspicion,  owed  the  defendant  no  duty  to  distrust 
Walter  and  to  examine  the  two  notes  to  see  whether  his  representa- 
tion was  true  or  not.  No  case  is  cited  nor  principle  suggested 
requiring  that.  A  bank  is  bound  to  know  the  signature  of  its  depositor, 
and,  therefore,  if  it  pays  a  forged  check  purporting  to  be  his,  it  must 
bear  the  loss.  So  the  acceptor  of  a  bill  is  bound  to  pay  it  although 
the  drawer's  name  is  forged,  for  the  presentation  of  the  bill  is  a 
direct  appeal  to  him  to  accept  it  or  to  reject  it.  It  is  an  inquiry  as 
to  its  genuineness,  addressed  to  the  one  who,  of  all  others,  is  sup- 
posed to  be  best  able  to  answer  it,  and  whose  answer  is  most 
satisfactory.  He  is,  moreover,  the  person  to  whom  the  bill  itself 
points  as  the  legitimate  source  of  information  to  others,  and  if  he 
were  permitted  to  dishonor  the  bill  after  he  has  once  honored  it,  the 
very  foundation  of  confidence  in  commercial  paper  would  be  shaken. 
But  the  drawee  of  a  bill  is  not  bound  to  know  the  signature  f)f  the 
payee,  nor  to  examine  and  ascertain   whether  the   indorsement   is 


584  DISCHARGE   OF   INSTRUMENT.  [ART.  IX. 

genuine;  and  if  he  pays  on  a  forged  indorsement,  though  to  an  inno- 
cent holder,  he  can  recover  the  money.  {Corn  Exchange  Bank  v. 
Nassau  Bank,  91  N.  Y.  74;  Insurance  Co.  v.  Bank,  60  N.  H.  442.) 
Nor  is  a  bona  fide  indorsee,  whether  before  or  after  acceptance, 
bound  to  inquire  into  the  genuineness  of  a  I)ill,  in  order  to  retain 
the  money  received  by  him  from  the  drawee  in  payment  thereof. 
{Price  V.  Ncale,  3  Burr.  1354,  a  case  that  has  never  been  departed 
from.)  So  if  a  bank  receives  as  genuine,  fraudulently  altered  bills 
of  its  own,  and  passes  them  to  the  credit  of  a  depositor  who  acts  in 
good  faith,  it  is  bound  by  the  credit  thus  given,  for  it  was  its  duty 
to  know  its  own  bills.  {Bank  of  the  United  States  v.  Bank  of  Georgia, 
10  Wheat.  2)2iZ-) 

But  the  case  at  bar  is  unlike  the  case  of  a  drawee  who  pays  or 
accepts  a  forged  bill,  or  of  a  bank  that  receives  as  genuine,  forged 
notes  purported  to  be  its  own,  for  here  the  bank  was  not  bound  to 
know  the  defendant's  handwriting,  and  it  was  not  its  duty  to  examine 
with  reference  to  ascertaining  a  thing  that  it  was  not  bound  to  know. 
But  by  this  we  do  not  mean  to  say  that  it  could  shut  its  eyes  that  it 
might  not  see,  or  turn  away  lest  otherwise  facts  might  be  disclosed 
at  variance  with  what  it  represented  to  exist,  for  that  would  be  bad 
faith  and  breach  of  its  duty.  It  follows,  therefore,  that  as  here 
was  no  duty  to  examine,  there  was  no  negligence  in  not  examining. 
Nor  was  the  representation  of  payment  that  the  bank  made,  false 
to  its  knowledge,  as  claimed,  but  true  in  its  belief,  in  substance  and 
effect,  for  had  the  forged  note  been  genuine  it  would,  in  law,  have 
paid  the  other  note  and  extinguished  it  as  affording  a  cause  of  action 
against  the  defendant;  and  as  knowledge  of  the  falsity  of  the  repre- 
sentation is  not  imputable  to  the  bank,  as  it  was  not  in  a  position 
that  it  ought  to  have  known,  there  can  be  no  estoppel  on  this  score. 
The  case  comes  to  this,  then,  that  said  representation  was  a  mis- 
take on  the  part  of  the  bank,  arising  from  its  non-culpable  ignorance 
of  the  truth,  and  brought  about  by  the  fraud  of  Walter;  and  it 
would  seem  that  a  representation  induced  by  fraud  will  not  estop. 
(Big.  Estop.,  3d  ed.  491.) 

But  it  is  claimed  that  if  a  mistake,  the  case  is  one  that  calls  for 
the  application  of  the  rule  that  when  a  mistake  has  been  made  from 
which  one  of  two  innocent  parties  must  suffer,  he  must  suffer  who 
made  the  mistake,  especially  when,  as  here,  the  chances  of  business 
have  placed  the  loss  upon  him;  and  The  Gloucester  Bank  v.  The 
Salem  Bank  (17  Mass.  33,)  is  cited  in  support  of  this  proposition. 
That  was  a  case  in  which  the  plaintiff  had  paid  to  the  defendant, 
notes  on  which  the  name  of  its  president  had  been  forged,  but  which 
were  otherwise  genuine,  and  had  neglected  for  fifteen  days  to  return 


I.  3]  ALTERATION.  585 

them;  and  the  court  stated  the  question  to  be,  whether,  as  between 
the  parties  who  were  equally  innocent  and  ignorant,  the  loss  should 
remain  on  the  plaintiff,  where  the  chance;,  of  business  had  placed  it, 
or  be  shifted  back  upon  the  defendant,  which  had,  by  good  fortune, 
rid  itself  of  it.  It  then  went  on  to  say,  that  in  all  such  cases  the 
just  and  sound  principle  of  decision  had  been,  that  if  the  loss  could 
be  traced  to  the  fault  or  neglect  of  either  party,  it  should  be  fixed 
on  him;  but  that  generally,  when  no  fault  nor  negligence  was 
imputable  to  either  party,  the  loss  had  been  suffered  to  remain  where 
the  course  of  business  had  placed  it.  But  the  first  part  of  that 
principle  is  not  applicable  here,  for  the  loss  is  not  traceable  to  the 
fault  nor  the  neglect  of  the  plaintiff.  Nor  is  the  second  part  any 
more  applicable,  for  it  can  hardly  be  said  that  the  chances  of  busi- 
ness have  placed  the  loss  on  the  plaintiff,  but  rather  on  the  defend- 
ant; but  if  it  can,  the  plaintiff,  in  legal  effect,  holds  the  defendant's 
note,  and  it  has  not  been  paid,  and  the  plaintiff  is  not  estopped  from 
collecting  it  of  him.  In  these  circumstances,  the  chances  of  business 
can  avail  the  defendant  nothing. 

Judgment  affirmed.' 


3.  Alteration. 
(d-)  Effect  of  alteration. 

§  205      HORN   AND  LONG  v.  NEWTON  CITY  BANK.  [§  124] 

32  Kansas,  518.  —  18S4. 

Action  against  makers  of  a  promissory  note.  Judgment  for  plain- 
tiff against  both  defendants. 

The  note  was  given  by  defendants  to  a  named  payee  for  the  pur- 
chase price  of  a  threshing  machine  which  defendants  intended  to  run 
as  partners.  Horn  and  the  payee  authorized  the  note  to  be  changed 
so  as  to  make  one  Hildreth  the  payee.  Long  did  not  know  of  or 
afterward  consent  to  the  change. 

The  opinion  of  the  Court  was  delivered  by  — 

HoRTON,  C.  J. :  —  It  is  the  contention  of  Long,  one  of  the  plain- 
tiffs in  error  —  a  defendant  below  —  that  there  had  been  a  material 
alteration  in  the  note  sued  on  without  his  consent,  thereby  releasing 
him  from  all  liability  upon  it.  The  note  was  originally  drawn  jiay- 
able  to  "  H.  A.  Pitts'  Sons  Manufacturing  Company,"  :ind  after  hav- 
ing been  given   to  that  company  it  was  altered  by  substituting  the 

'  Accord:  Humboldt  Bank  v.  Rossing,  95  Iowa,  l.  —  Ed. 


586  DISCHARGE    OF    INSTRUMENT.  [ART.  IX. 

name  of  "  O.  B.  Hildreth  "  for  the  original  payee.  This  alteration 
was  made  without  the  knowledge  or  consent  of  Long,  and  he  has 
never  consented  to  or  ratified  the  same.  Within  all  the  authorities, 
the  substitution  of  O.  B.  Hildreth  in  the  place  of  the  original  payee 
was  a  change  of  the  personality  of  one  of  the  parties  to  the  note,  and 
therefore  a  material  alteration.  {Bank  v.  Hall,  i  Halst.  N.  J.  L. 
215;  Stoddard  \.  Fcnnii/ian,  108  Mass.  366;  Draper  \.  Wood,  112  Id. 
315  ;  17  Am.  Rep.,  pp.  92,  106;  2  Daniel  on  Nag.  Inst.,  §§  1387-1390.) ' 

If  Horn  and  Long  had  been  associated  together  in  a  trading  part- 
nership, then  either  member  of  the  firm  might  have  bound  his  co-part- 
ner by  e.Kecuting  a  promissory  note  in  the  name  and  on  behalf  of  the 
firm,  in  any  transaction  pertaining  to  their  partnership  business.  We 
suppose  that  under  such  circumstances,  the  material  alteration  of  a 
note  executed  by  the  firm,  with  the  knowledge  and  consent  of  one  part- 
ner, would  bind  his  co-partner,  if  the  note  had  been  given  within  the 
apparent  scope  of  the  business  of  the  firm,  as  it  is  a  general  principle 
relating  to  trading  partnerships  that  each  partner  is  the  lawful  agent 
in  the  partnership  in  all  matters  within  the  scope  of  the  business. 
{Deitz  v.  Regnier,  27  Kans.  94.) 

A  non-trading  partnership,  however,  is  controlled  by  rules  differing 
from  those  controlling  a  commercial  or  trading  one.  [Deiiz  v. 
Regnier,  supra.)  Under  the  findings  of  the  court,  Horn  and  Long 
were  partners  only  in  the  running  of  a  threshing  machine,  and  such 
a  partnership  is  one  of  occupation  or  employment  only.  It  is  not  a 
commercial  or  trading  partnership.  There  was  joint  ownership 
between  Horn  and  Long  in  the  threshing  machine,  and  there  was 
a  co-partnership  between  them  in  the  matter  of  operating  the 
machine,  with  the  intention  of  dividing  the  profits  and  losses 
equally;  but  yet  their  business  did  not  require  the  execution 
of  negotiable  paper  as  the  proper,  convenient,  and  usual  mode  of 
conducting  it.  In  a  partnership  to  operate  a  threshing  machine 
there  does  not  exist  the  implied  power  in  the  several  members  to 
make  promissory  notes,  and  thereby  bind  the  firm.  Whoever  deals 
with  an  individual  jointly  interested  with  another  in  the  operation  of 
a  threshing  machine  must,  at  his  peril,  inform  himself  of  the  nature 
of  the  partnership.  The  note  in  suit  was  signed  by  the  makers  in 
their  individual  names,  and  not  as  a  firm.  Therefore,  upon  the  face 
of  the  note  one  of  the  makers  thereof  had  no  right  to  bind  the  other 
without  his  consent  to  any  material  alteration.  Horn  had  no, 
authority  to  make  a  promissory  note  in  the  name  of  the  firm  or  to 
bind  Long,  unless  the  latter  had  been  previously  consulted  and  con- 


*  See  §  206  [125],  subsec.  4. 


—  Ed. 


I.  3-]  ALTERATION.  587 

sented  to  the  transaction.  {Lanier  v.  McCabe,  2  Fla.  32;  Frince  v. 
Craiuford,  50  Miss.  344;  Crossthwait  v.  Ross,  i  Humph.  [Tenn.]  23 > 
Smith  V.  Sloane,  37  Wis.  2S5,  19  Am.  Rep.  757;  Deardorf  \.  Thatcher, 
78  Mo.  128;  I  Daniel  on  Neg.  Inst.,  §§  355-358.)  If  he  had  not  the 
authority  to  make  promissory  notes  and  draw  bills  of  exchange  and 
thereby  bind  the  firm,  he  had  no  right  to  authorize  a  change  of 
payee  in  the  note  executed  by  him  and  Long  so  as  to  bind  Long 
thereby.  The  material  alteration  of  a  note  with  the  consent  of  a 
maker  is  virtually  making  a  new  note  and  ante-dating  it. 

We  therefore  conclude  that  the  material  alteration  of  the  note  in 
question  released  Long.  [Broughton  v.  Fuller,  9  Vt.  373.)  That 
the  bank  purchased  the  note  before  maturity,  for  a  valuable  con- 
sideration, and  is,  therefore,  a  bona  fide  holder  of  the  note,  does  not 
prevent  Long  from  asserting  the  material  alteration  of  the  note  as 
a  defence.'  (J  Fa  it  v.  Pomeroy,  20  Mich.  425;  Benedict  v.  Cow  den, 
49  N.  Y.  396;  Bank  V.  Stoivell,  123  Mass.  196;  2  Daniel  on  Neg. 
Inst.,  §§  1410-1413.) 

[Omitting  a  question  of  practice.] 

The  judgment  against  Long  will  be  reversed,  and  the  cause 
remanded,  with  direction  to  the  court  below  to  render  judgment  in 
his  favor  upon  the  findings  of  fact.'' 

'  "  It  is  urged,  however,  that  the  plaintiff,  being  an  innocent  holder  for  value, 
can  recover  notwithstanding  the  alteration,  because  they  propose  to  recover 
only  the  amount  of  the  note  as  it  was  before  the  alteration.  If  such  were  the 
law  forgeries  by  alteration  would  be  protected  by  the  law.  The  fraudulent 
payee  would  run  no  risk  of  loss  because  he  would  only  have  to  transfer  the  note 
to  an  indorsee  who  might  recover  the  original  amount  of  the  note  by  simply 
proving  that  he  was  innocent  of  the  fraud.  But  the  law  is  not  so  charitable  to 
this  class  of  persons." — Gettysbwg  N'at.  Bk.  v.  Chisolm,  169  Pa.  St.  564,  569: 
Citizens  Nat.  B/e.  v.  Witliams,  174  Pa.  St.  66  (doubting  the  correctness  of 
Kountz  v.  Kennedy,  63  Pa.  St.  187,  contra). 

There  is  some  authority  for  the  proposition  that  a  banker  after  payment,  has 
the  right  to  hold  an  altered  check  for  its  correct  amount  as  against  the  maker. 
Hall  V.  Fuller,  5  B.  &  C.  750;  Siisqiiehanna  Bli.  v.  Loomis,  85  N.  Y.  207;  (cf. 
Crawford  V.  West  Side  Bank,  100  N.  Y.  50,  57);  Redington  v.  IVoods,  45  Cal.  406. 
Compare  Bills  of  Exchange  Act,  g  60,  as  to  payment  under  forged  indorsement. 

Under  §  205  [124]  the  holder  in  due  course  of  an  instrument  fraudulently 
altered  is  now  permitted  to  enforce  payment  according  to  the  original  tenor. 
Prior  to  the  statute  this  could  not  be  done,  though  it  seems  to  have  been 
allowed  in  the  exceptional  case  of  IVorrallv.  Glieen,  39  Pa.  St.  388.  Where  the 
alteration  is  by  a  stranger,  or,  if  by  a  party  to  the  bill,  is  innocent,  many 
American  courts  allow  a  recovery  upon  the  original  consideration.  See  cases 
following.  —  Ed. 

'  There  may,  of  course,  be  a  subsequent  ratification  of  an  unauthorized  altera- 
tion. 2  Daniel  on  Neg.  Inst.,  8p  1401-1403;  Dickson  v.  Bamhcrgcr,  107  Ala.  293: 
Matlock  V.    Wheeler,  29  Ore.  64.      Blanks  left   in   an    instrument   import  a //////<; 


588  DISCHARGE   OF   INSTRUMENT.  [ART.  IX. 

§  205  [124]  White  Sewixg  Machine  Co.  ?•.  Dakin,  86  Michigan, 
581.  —  1891.  Champlin,  C.  J. — If  any  alteration  was  made  after 
the  execution  of  the  bond,  it  was  done  by  Van  Ness,  and  although 
he  was  the  agent  of  the  plaintiff,  and  received  and  forwarded  the 
bond  in  question  to  the  plaintiff  for  its  approval  or  rejection,  yet 
there  is  no  testimony  in  this  record  tending  to  show  that  he  was 
expressly  or  impliedly  authorized  to  make  any  alteration  in  the 
bond. 

The  rule  of  law  is  that,  when  an  alteration  is  made  by  a  third 
party,  it  is  an  act  of  spoliation,  and  the  alteration,  although  material, 
cannot  invalidate  the  written  instrument;  and  when  the  spoliation 
is  done  by  the  agent  of  one  of  the  parties,  it  will  not  avoid  the  con- 
tract if  the  agent  had  no  express  or  implied  authority  to  do  it.  (i 
Am.  and  Eng.  Encyc.  Law,  505;  Van  Brunt  v.  Eoff,  35  Barb.  501; 
Collins  w.  Makepeace,  13  Ind.  488;  Himt  \ .  Gray,  35  N.  J.  Law,  227; 
Bigelow  V.  Stilphcn,  35  A't.  521;  Miller  v.  Reed,  3  Grant,  Cas.  51; 
s.  c.  27  Penn.  St.  244;  Terry  v.  Hazlewood,  i  Duv.  104.)  The 
declaration  counts  upon  the  bond  as  being  in  a  penalty  of  $1,000,  and 
assigns  breaches  of  the  conditions.     It  follows  that  the  bond  would 

facie  authority  to  the  holder  to  fill  them.  Neg.  Inst.  L.,  §  33  [14].  But  an 
alteration,  although  made  in  order  to  correct  a  mistake,  and  conform  the  writ- 
ten instrument  to  the  actual  intention  of  the  parties,  is  fatal  and  destroys  the 
validity  of  the  instrument.  Xci^'i/ian  v.  A'ing,  54  Oh.  St.  273,  citing  cases  con- 
tra; Evans  v.  Foreman,  60  Mo.  449. 

A  restoration  of  the  instrument  to  its  original  form  will  not  revive  liability 
upon  it.  Citizens  A^at.  Bank  v.  Riclunond,  121  Mass.  no;  Locknane  v.  Ennnei'- 
son,  II  Bush.  (Ky.)  69;  Fulmer  v.  Seitz,  68  Pa.  St.  237  (doubting  Kotintz  v. 
Kennedy,  63  Pa.  St.  1S7);  Citizens  N.  B.  v.  IVilliams,  174  Pa.  St.  66;  MeDaniel 
V.   Whitsett,  96  Tenn.  10. 

Material  Alteration.  — As  to  what  changes  constitute  a  material  alteration, 
see  §  206  [125];  2  Daniel  on  Neg.  Inst.,  §§  1373-1404;  2  Am.  &  Eng.  Encyc.  L. 
(2d  ed.),    pp.  222-248;   Ives  v.  Farmers'  Bank,  2   Allen  (Mass.),  236,  ante,  p.    293. 

Burden  OF  Proof.  —  There  is  a  hopeless  conflict  as  to  the  presumption  and 
burden  of  proof  in  the  case  of  the  apparent  alteration  of  an  instrument.  One 
class  of  cases  requires  the  one  offering  the  paper  to  explain  any  apparent  altera- 
tion. Croswell  v.  Labrec,  81  Me.  44;  Simpson  v.  Stackhouse,  9  Pa.  St.  1S6; 
Gettysburg  N.  B.  v.  Chisolm,  169  Pa.  St.  564;  Elgin  v.  Hall,  82  Va.  680;  Cole 
V.  Hills,  44  N.  H.  227;  Gowdey  v.  Robbins,  3  App.  Div.  (N.  Y.j  353;  Evans  v. 
Deming,  20  Wkly.  Dig.  (N.  Y.)  71. 

Another  and  perhaps  weightier  class  of  cases  raises  no  presumption  against 
the  paper  but  casts  the  burden  upon  the  defendant  to  prove  any  alleged  altera- 
tions. Wilson  V.  Hayes,  40  Minn.  531;  Wolferman  v.  Bell,  6  Wash.  84;  Yakima 
N.  B.  V.  Hnipe,  6  Wash.  348;  Hagan  v.  Merchants,''  etc.  Ins.  Co.,  81  Iowa,  321; 
Neilv.  Case,  25  Kans.  510;  F7'anklin  v.  Baker,  48  Oh.  St.  296;  iVewman  v.  Hing, 
54  Oh.  St.  273.  See  2  Daniel  on  Neg.  Inst.  §§  1417-1421;  2  Am.  &  Eng. 
Encyc.  L.  (2nd  ed.),  pp.  272-279.  —  Ed. 


•J  ALTERATION. 


589 


be  a  valid  instrument  in  the  hands  of  the  plaintiff  for  what  it  was 
before  the  alteration  was  made. 


§  205  SULLIVAN  V.  RUDLSILL.  [§  124] 

63  Iowa,  15S.  — 1S84. 

Action  on  a  note,  and  upon  original  indebtedness.  After  the 
note  was  given  by  defendant,  with  Fuller  as  surety,  the  plaintiff 
innocently  procured  W.  A.  R.  to  sign  also  as  surety.  The  court 
held  the  note  void,  but  allowed  a  recovery  against  defendant  upon 
the  original  consideration.     Action  dismissed  as  to  Fuller. 

Beck,  J.  — This  court  has  held  that  the  signing  of  a  promissory 
note  by  one  as  a  joint  maker,  after  the  execution  by  the  original 
maker,  without  his  knowledge  and  consent,  is  a  material  alteration, 
which  will  defeat  the  instrument.  {Hamilton  v.  Hooper,  et  aL,  46 
Iowa,  515;  Dicker /nan  v.  Miner,  43  Id.  508;  Hall's  Admx.  v. 
Mc Henry,  19  Id.  521.)' 

It  has  also  been  ruled  by  this  court  that,  when  a  promissory  note 
has  been  innocently  altered,  without  any  fraudulent  purpose,  the 
payee  may  recover  in  an  action  brought  upon  the  original  considera- 
tion. {Kraicse  v.  Meyer,  32  Iowa,  566;  Cloiigh  v.  Seay,  49  Id.  iii; 
Morrison  Bros.  v.  Hnggins,  et  al.,  53  Id.  76;  Eckert  a^  Williams  \. 
Picket,  59  Id.  545.) 

Upon  the  facts  found  by  the  referee,  which  are  not  brought  in 
question,  and  under  the  petition  which  sought  to  recover  upon  the 
original  consideration,  the  circuit  court  rightly  rendered  judgment 
for  plaintiff." 

'Contra:  Merstnan  v.  IVei-ges,  112  U.  S.  139;  Royse  \.  State  Bank  (Neb.),  69 
N.  W.  301;  Babcock  v.  Murray,  58  Minn.  385.  See,  however,  Neg.  Inst.  L., 
§  206  [125],  subsec.  4.  —  Ed. 

''Accord  (where  alteration  innocent):  Vogle  v.  Ripper,  34  111.  100;  Owen  v. 
Hall,  70  Md.  97;  Booth  v.  Powers,  56  N.  Y.  22;  York  \.  Janes,  43  N.  J.  L.  332; 
Miller  v.  Stark,  148  Pa.  St.  164;  Garden  v.  Robertson,  48  Wis.  493;  A'eene  v. 
Weeks,  (R.  I.)  33  Atl.  446.  A  subsequent  indorsee  must  be  treated  also  as  an 
assignee  of  this  right  of  action  upon  the  original  consideration  in  order  to  main- 
tain an  action.  Burwell  v.  Orr,  84  111.  465;  State  Bank  v.  Shaffer,  g  Neb.  i; 
Port  Huron  First  N.  B.  v.  Carson,  60  Mich.  432.  If  the  instrument  constitutes 
the  only  obligation,  all  remedies  are  lost  by  a  material,  though  innocent,  altera- 
tion. Cra7oford  v.  West  Side  Bank,  loo  N.  Y.  50;  Tate  v.  Fletcher,  77  Ind.  102. 
A  fraudulent  alteration  extinguishes  all  remedies.  Smith  v.  A/ace,  44  N.  H. 
553;  Green  v.  Sneed,  loi  Ala.  205.  E.xcept,  under  Neg.  Inst.  L.,  ij  205  [124],  as 
to  subsequent  holders  indue  course  of  negotiable  instruments.  See  ante,  p.  587, 
note.  —  Ed. 


590  DISCHARGE   OF   INSTRUMENT.  [ART.  IX. 

((^)  Negligence  of  maker. 

§  205  CAPE  ANN  NAT.   BANK  v.  BURNS.  [§  124] 

129  Massachusetts,  596. — 1880. 

Action  on  a  promissory  note  for  $174.  Defence,  an  alteration  by 
which  a  note  drawn  for  $74  had  been  raised  to  $174.  Plaintiff  con- 
tended that,  as  he  was  a  holder  in  due  course,  he  was  entitled  to 
recover  if  the  jury  should  find  that  the  defendant  negligently  signed 
the  note  in  such  condition  that  owing  to  blank  spaces  the  payee  was 
enabled  to  make  the  fraudulent  alteration  in  such  manner  as  to  show 
no  indication  to  a  careful  observer  that  any  such  alteration  had  been 
made.  The  judge  ruled  otherwise,  and  declined  to  submit  that 
question  to  the  jury.     Verdict  for  defendant. 

Gray,  C.  J.  .  .  .  The  unauthorized  alteration  of  the  note 
which  was  complete  upon  its  face,  and  which  had  not  been  entrusted 
by  the  defendant  to  anyone  for  the  purpose  of  being  filled  up  or 
added  to,  could  not  make  him  liable  to  an  action  upon  the  note  in 
its  altered  form.  {Angle  v.  Northwestern  Ins.  Co..,  92  U.  S.  330; 
Wade  V.  IVit/iington,  i  Allen,  561 ;  Greenfield  Savings  Bank  v.  Sto'iuell., 
123  Mass.  196;  Goodman  v.  Eastman,  4  N.  H.  455;  McGrath  v. 
Clark.,  56  N.  Y.  34;  Holmes  v.  Trumper.,  22  Mich.  427.) 

Exceptions  overruled.' 


§  205  NOLL  V.  SMITH.  [§  124] 

64  Indiana,  511.  —  187S. 

Action  against  maker  by  indorsee.  Defence,  that  the  notes  had 
when  executed  a  condition  annexed  that  they  were  not  to  be  paid 
unless  defendant  sold  machines  equal  to  the  amount  of  the  notes, 
and  that  the  notes  had  been  altered  by  cutting  off  the  portion  con- 
taining the  condition.     Judgment  for  plaintiff. 

NiBLACK,  J.    [After  stating  the  facts.]  — We  understand  the  gen- 

'  See  especially,  supporting  the  decision  that  negligence  of  the  maker  is 
immaterial,  Greenfield  Savings  Bank  \.  Stowell,  123  Mass.  196;  Scholfieldw  Earl 
of  Londesborough,  1895,  i  Q.  B.  536,  explaining  Young  v.  Grote,  4  Bing.  253; 
Burrows  v.  Klunk,  70  Md.  451.  Contra:  Isnard  v.  Torres,  10  La.  Ann.  103; 
Yocumv.  Smith,  bz  111.  321;  Blakey  \.  fohnson,  13  Bush  (Ky.)  197;  Garrard  y. 
Haddan,  67  Pa.  St.  82.  See  Rcdlich  v.  Doll,  54  N.  Y.  234.  The  distinction  must 
be  clearly  observed  between  an  instrument  issued  with  blanks  to  be  filled  and 
one  issued  with  the  blanks  filled  but  unnecessary  or  negligent  spaces  left  in  the 
blanks.  See  Neg.  Inst.  L.,  §  33  [14];  Cases,  ante,  pp.  2SS-298;  2  Daniel  on  Neg. 
Inst.,  §§  1405-1409:  2  Am.  &  Eng.  Encyc.  L.  (2d  ed.),  pp.  249-258.  —  Ed. 


I-  3]  ALTERATION. 


591 


era!  rule  to  be  that  the  removal  or  detachment  of  a  material  con- 
dition annexed  to,  or  forming  a  part  of,  a  negotiable  note,  without 
the  knowledge  or  consent  of  the  maker,  will  ordinarily  be  a  sufficient 
defence  to  such  note,  even  in  the  hands  of  an  innocent  holder,  and 
especially  when  such  removal  or  detachment  is  made  under  circum- 
stances which  put  the  purchaser  of  the  note  fairly  upon  his  inquiry 
as  to  the  altered  condition  of  the  note,  and  this  we  construed  to  be 
the  doctrine  of  the  case  of  Cochran  v.  Nebeker  (48  Ind.  459),  cited 
and  discussed  by  the  appellant;  but  that,  when  the  note  and  con- 
dition are  negligently  so  executed  by  the  maker  that  the  condition 
may  easily  be  removed,  without  in  any  manner  mutilating  or  defac- 
ing the  note,  and  the  note  is  thus,  without  objection,  put  in  circula- 
tion in  that  form,  the  maker  cannot  be  heard  to  deny  his  liability  to 
pay  the  note  in  the  hands  of  an  innocent  holder,  notwithstanding 
the  condition  may  have  been  detached  from  it  before  such  innocent 
holder  became  the  owner  of  it.  Such  was,  in  substance,  the  decision 
of  this  court  in  the  case  of  Cornell  v.  Nebeker  (58  Ind.  425).  See, 
also,  Woollen  v.  Ulrich  (64  Ind.  120),  approving  and  following  that 
case. 

Upon  the  authority  of  these  last  named  cases,  the  judgment  in 
this  case  will  have  to  be  affirmed. 

The  judgment  is  affirmed,  with  costs.' 


§  205  [124]  Brown  v.  Reed,  79  Pa.  St.  370.  —  1875.  The  original 
instrument  was  as  follows:  — 

North  East  Aprils  3d,  1872. 

Six  month  after  date  I  promise  to  pay  to  J.  B.  Smith  or  bearer    fifty   dollars     when    I    sell  by 

order     Two     Hundred    and   Fifty  Dollars  worth  of  Hay  and    Harvest  Grinders, 

for     value     received,      with      lej^al     interest,     without  appeal,  and   also  without 
defalcation  or  stay  of  execution 

T.  H.  Brown.  Agent  for  May  and  Harvest  Grinders. 

The  instrument  offered  in  evidence  was  the  left  hand  portion  of 
the  above,  which  bore  the  indorsement  "  J.  B.  Smith."  The  paper 
had  been  cut  in  two  w-ithout  Brown's  knowledge.  Plaintiff  was  a 
holder  in  due  course  of  the  negotiable  portion.  Defendant  offered 
to  prove  the  alteration,  and  the  offer  was  rejected. 

Held:  "  Whether  there  was  negligence  in  the  maker  was  clearly 
a  question  of  fact  for  the  jury.  The  line  of  demarcation  between 
the  two  parts  might  have  been  so  clear  and  distinct  and  given  the 

'  Such  an  alteration  is  material  and  will  prevent  recovery  by  bona  fide  holders. 
Sco field  V.  Ford,  56  Iowa,  370;  Wait  v.  Poineroy,  20  Mich.  425;  Benedict  v. 
Cowden,  49  N.  Y.  396;  Gerrish  v.  Giiiics,  56  N.  H.  9;  Stephens  v.  Davis,  85  Tenn. 
271.  Negligence  of  the  maker  may,  however,  estop  him  from  setting  uj)  the 
alteration.  Harvey  v.  Smith,  55  111.  224;  Seibel  v.  Vaui^han,  69  111.  257;  Phelan 
V.  Moss,  67  Pa.  St.  59;   ZiniDierniati  v.  Rote,  75  Pa.  St.  188. —  En. 


592  DISCHARGE    OF   INSTRUMENT.  [ART.  IX. 

instrument  so  unusual  an  appearance  as  ought  to  have  arrested  the 
attention  of  any  prudent  man.  But  it  may  have  been  otherwise.  If 
tiiere  was  no  negligence  in  the  maker,  the  good  faith  and  absence  of 
negligence  on  the  part  of  the  holder  cannot  avail  him.  The  altera- 
tion was  a  forgery,  and  there  was  nothing  to  estop  the  maker  from 
alleging  and  proving  it.  .  .  .  We  think  then  that  the  evidence 
offered  by  the  defendant  below  should  have  been  received." 


II.  Discharge  of  party  secondarily  liable. 

§  201  JENKINS  V.  MACKENZIE.  [§  120] 

6  Upper  Canada,  Q.  B.,  544. —  1849. 

James  McKenzie  made  a  note  payable  to  Joseph  Pierson  or  order, 
which  Pierson  indorsed;  and  after  him,  John  James  McKenzie 
(defendant),  indorsed  to  Proby,  w^io  has  since  died  leaving  said 
Joseph  Pierson  one  of  his  executors. 

Pierson  is  now,  as  Proby's  executor,  plaintiff  in  an  action  against 
defendant  McKenzie.  Plea,  that  Pierson  is  liable  over  to  defend- 
ants in  case  defendant  should  be  obliged  to  pay.      Demurrer  to  plea. 

Robinson,  C.  J.,  delivered  the  judgment  of  the  court. 

The  plea  does  not  take  the  exception,  that  Pierson  is  discharged 
by  being  made  executor  by  Proby.  It  would  seem  to  be  quite  clear, 
that  if  Pierson  were  the  maker,  the  debt  would  be  discharged,  for 
it  would,  as  to  the  creditors,  be  regarded  as  assets  in  his  hands,  as 
executor,  and  so  there  could  be  no  remedy  against  this  indorser.' 

Discharge  by  Operation  of  Law.  —  A  transfer  to  acceptor  or  maker  as  exe- 
cutor of  holder  extinguishes  the  paper.  Freaklcy  v.  Fox,  9  B.  &  C.  130.  To 
the  wife  of  the  acceptor  or  maker  at  common  law.  Abbott  v.  Winchester,  105 
Mass.  115.  Or,  after  the  marriage  of  a  woman  who  has  previously,  while 
single,  issued  negotiable  paper,  a  transfer  to  the  husband.  CJiapincin  v.  Kellogg, 
102  Mass.  246. 

It  seems  that  negotiable  paper  is  not  extinguished  by  a  discharge  in  bank- 
ruptcy or  the  running  of  the  statute  of  limitations,  but  is  revived  by  a  new 
promise  so  that  a  subsequent  transferee  is  entitled  to  enforce  it.  Way  v. 
Sperjy,  6  Cush.  (Mass.)  238,  citing  cases  contra. 

So  a  debt  barred  by  law  is  a  ;;ufficient  consideration  for  a  subsequent  bill  or 
note  given  for  its  payment.  Wislizeinis  v.  O' Fallon,  gi  Mo.  184;  Giddings  v. 
Giddings,  51  Vt.  227;  Stafford  v.  Bacon,  25  Wend.  (N.  Y.)  384;  Midi  v.  Van 
Trees,  50  Cal.  547;  In  re  Merriman,  44  Conn.  587. 

A  statutory  bar  to  the  enforcement  of  the  consideration  is  not  a  bar  to  the 
enforcement  of  the  bill  or  note,  e.  g.,  the  statute  of  frauds.  Jones  v.  Jones,  6  M. 
&  W.  84;  Edgerton  v.  Edgerton,  8  Conn.  6;  Paul  v.  StackJunise,  38  Pa.  St.  302. 
Contra:  Hooker  v.  Knab,  26  Wis.  511 ;  Combs  v.  Bateman,  10  Barb.  (N.  Y.)  573 
(semble).     Cf.  Ranbitschek  v.  Blank,  80  N.  Y.  479.  —  Ed. 


^^■J  DISCHARGE    UF    SECONDARY    PARTY.  593 

We  cannot  hold  the  effect  to  be  different,  because  Pierson,  instead 
of  being  maker  of  the  note,  is  an  indorser,  but  prior  to  this  defend- 
ant's indorsement.  The  effect  is  the  same  as  if  Pierson  had  paid 
the  debt  to  the  executors,  or  had  been  released  without  payment, 
after  which  there  could  be  no  remedy  against  any  subsequent 
indorser. 

As  we  see  this  to  be  the  state  of  facts  on  the  record,  we  must  give 
judgment  on  demurrer  for  the  defendant;  for  the  objection  is  of 
that  nature,  that  it  goes  to  the  very  right  of  action  and  cannot  be 
overlooked  by  us.  (4  Scott's  N.  R.  287;  3  Esp.,  c.  46;2  B.  &  P.  62; 
9  B.  &  C.  130;  4  M.  &  Ry.  22;  Co.  Lit.  264  (b)  note  209;  i  Wi!.' 
46;  2  Bl.  Rep.  1236;  4  T.  R.  825;  2  Showers,  481;  Story,  Prom. 
Notes.) 

Per  Curiam.  — Judgment  for  defendant  on  demurrer.' 


§  201  JOSLYN  7'.  EASTMAN.  [§  120] 

46  Vermont,  258.  —  1S73. 

Action  on  a  note  of  which  Hall  was  maker  and  defendant  surety. 
Hall's  administrator  had  tendered  payment  to  plaintiff,  which  had 
been  refused.     Judgment  for  defendant. 

The  opinion  of  the  Court  was  delivered  by  — 

RovcE,  J.  .  .  .  The  important  question  is,  whether  the 
defendant  can  avail  himself  of  the  benefit  of  the  tender  which 
the  jury  have  found  was  made  to  the  plamtiff.  The  obligation  of  the 
surety  being  accessory  to  that  of  the  principal,  the  surety  could  not 
be  called  upon  as  long  as  the  principal  had  done  all  that  could  be 
legally  required  of  him  in  the  performance  of  the  contract.  The 
tender  which   the  jury  have  found  was  made,  was  legally  sufficient, 

'  Any  voluntary  act,  or  perhaps  omission,  of  the  holder  which  discharges  a 
prior  party  (principal)  will  discharge  a  subsequent  party  (surety).  Allowing 
statute  of  limitations  to  run  in  favor  of  principal  or  prior  party.  Auchavipangh 
V.  Schmidt,  70  Iowa,  642;  Bridges  v.  Blake,  106  Ind.  332;  Shutts  n.  Fingar,  100 
N.  Y.  539.  Contra:  Villars  v.  Palmer,  67  111.  204;  Bull  v.  Coe,  77  Gal.  54; 
Banks  V.  State,  62  Md.  88;  Moore  v.  Gray,  26  Oh.  St.  525.  Bringing  an  action 
against  prior  party  resulting  in  judgment  for,  and  consequent  discharge  of, 
such  prior  party.  Ames  v.  Maclay,  14  Iowa,  281;  Baker  v.  Merriam,  97  Ind. 
539;  ^t'^l'^  V.  Coste,  36  Mo.  437.  But  a  discharge  of  a  prior  party  by  mere 
operation  of  law  will  not  discharge  the  surety.  Discharge  in  bankruptcy. 
Phillips  V.  Wade,  66  Ala.  53;  Lackey  v.  Steere,  121  111.  598;  Post  v.  Losey,  iir 
Ind.  74;  Cochrane  v.  Cushim;,  124  Mass.  219;  Li/m  v.  Hamilton,  34  N.  J.  L, 
305;  Hall  V.  Fowler,  6  Hill  (N.  Y.)  630.  Discharge  by  war.  Bean  v.  Chapman, 
62  Ala.  58.  —  Ed. 

NEGOT.   INSTRUMENTS  —  38. 


594  DISCHARGE   OF   INSTRUMENT.  [ART.  IX. 

and  would  have  been  available  as  a  defence  in  any  suit  the  plaintiff 
might  have  instituted  seeking  a  recovery  out  of  the  estate  of  Hall, 
and  we  think  it  is  equally  available  to  the  defendant.  When  a 
debtor  tenders  payment  of  the  debt  for  which  the  surety  is  obligated, 
and  the  creditor  declines  to  receive  it,  he  thereby  discharges  the 
surety.     The  judgment  of  the  county  court  is  affirmed.' 


§  201  ROCKVILLE  BANK  v.  HOLT.  [§  I20] 

5S  Connecticut,  526.  —  1890. 

Action  against  the  defendant  as  indorser  of  sundry  notes  and  bills 
of  exchange;  brought  to  the  Superior  Court  in  Tolland  county,  and 
tried  to  the  court  before  Torrance,  J.  Facts  found  and  judgment 
rendered  for  the  plaintiff,  and  appeal  by  the  defendant.  The  case 
is  fully  stated  in  the  opinion. 

Andrews,  C.  J.  —  The  L.  B.  Smith  Rubber  Company,  a  corporation 
doing  business  at  Setauket,  New  York,  being  indebted  to  the  defend- 
ant gave  him  three  promissory  notes,  and  accepted  three  bills  of 
exchange,  representing  such  indebtedness  and  aggregating  in  the 
whole  something  more  than  five  thousand  dollars  All  of  the  notes 
and  bills  were  payable  to  the  order  of  the  defendant,  were  by  him 
indorsed,  and  at  his  request  were  discounted  for  his  benefit  by  the 
plaintiff.  Shortly  thereafter  the  Rubber  Company  failed.  That 
failure  compelled  the  defendant  to  go  into  insolvency.  The  plaintiff 
presented  its  claim  against  his  insolvent  estate  and  received  a  divi- 
dend thereon.  The  defendant  having  since  that  time  acquired  other 
property,  the  plaintiff  brought  this  suit  and  attached  such  other  prop- 
erty Since  the  bringing  of  this  suit  the  plaintiff,  in  common  with 
nearly  all  the  creditors  of  the  L.  B.  Smith  Rubber  Company,  includ- 
ing the  defendant,  signed  an  agreement  which  is  fully  set  out  in  the 
finding,  but  which  it  is  not  necessary  here  to  repeat.  For  the  pur- 
poses of  the  present  discussion  it  is  sufficient  to  say  that  that  agree- 
ment provided,  among  various  other  things,  that  the  creditors  of  the 
Rubber  Company  should  assign  their  claims  to  certain  persons  called 
a  reorganizing  committee,  and  that  this  committee  should  proceed 
to  reorganize  the  company  and  should  issue  to  each  of  the  several 
creditors  in  payment  for  their  respective  claims  the  stock  of  the 
reorganized  company,  which  the  creditors  agreed  to  accept.  When 
the  plaintiff  signed  the  agreement  it  added  to  its  signature:  — 
"  reserving  all  rights  against  R.  G.  Holt,  or  against  his  estate,  or 

'Accord:  Sfa7-s  v.  Fan  Dtisen,  25  Mich.  351;  Spurgeon  v.  Sntitha,  114  Ind.  453. 
Contra:   Clark  v.  Sicklcr,  64  N.  Y.  231.  —  Ed. 


11.]  DISCHARGE   OF   SECONDARY    PARTY.  595 

assignee  for  the  benefit  of  his  creditors."     These  words  did    not 
appear  in  the  body  of  the  instrument. 

The  defendant  insists  that  by  signing  the  agreement  the  plaintiff 
assigned  all  its  claims  against  the  L.  B.  Smith  Rubber  Company  to 
the  reorganizing  committee,  and  that  as  he  is  liable  to  the  plaintiff 
only  as  a  surety  for  that  company  the  assignment  of  the  claim 
against  the  principal  debtor  discharges  him. 

That  an  unqualified  release  of  a  principal  debtor  will  be  a  dis- 
charge also  of  the  surety  is  admittedly  good  law.  The  plaintiff, 
however,  claims  that  by  the  reservation  appended  to  its  signature 
it  is  not  affected  by  that  rule.  The  defendant  cites  two  cases,  either 
of  which  by  its  terms  fully  supports  his  contention.  But  the 
authority  of  each  cf  these  cases  is  greatly  weakened,  if  not  entirely 
overturned,  by  later  decisions  in  the  same  jurisdiction.  lVel>b  v. 
Hewitt  (3  Kay  &  Johnson,  438),  is  substantially  overruled  by  Green 
V.  JVyiin  (L.  R.  7  Eq.  Cas.  31,  and  L.  R.  4  Ch.  Appeals,  204),  and 
Fanners'  Bank  v.  Blair  (44  Barbour,  641),  by  Morgan  v.  Smith  (70 
N.  Y.  545);  Coltw  V.  Davies  (73  N.  Y.  211);  Nat.  Bank  v.  Bigler 
(83  N.  Y.  51),  and  Shiitts  v.  Fingar  (100  N.  Y.  539.) 

It  is  stated  in  De  Colyar  on  Principal  and  Surety  (41S),  that  such 
a  reservation  as  was  made  by  the  plaintiff  prevents  there  being  any 
discharge  of  the  surety,  and  gives  as  authority:  [Kearsley  v.  Cole, 
16  Mees.  &  Wels  128;  IVyke  v.  Rogers,  i  De  G.  M.  &  G.  408;  Boater 
v.  Mayor,  19  C.  B.  N.  S.  76,  84;  Otven  v.  Homan,  4  H.  L.  Cases,  997; 
and  Close  v.  Close,  4  De  G.  M.  &  G.  176.  See,  also,  Tohey  v.  Ellis, 
114  Mass.  120;  KemoortJiy  v.  Sawyer.  125  Id.  28;  Bank  v.  Lineberger, 
83  N.  Car.  454;  Morse  v.  Huntington,  40  Vt.  493;  Hagey  v.  Hill, 
75  Penn.  St.  108;  Mueller  v.  Dobschuetz,  89  111.  176.)  The  weight 
of  authority  seems  to  us  to  be  strongly  adverse  to  the  defendant's 
claim. 

There  is  another  view  of  the  case  which  makes  it  clear  that  the 
defendant  is  not  entitled  to  a  discharge  by  reason  of  the  plaintiff's 
signing  the  agreement.  Whenever  a  creditor  gives  time  to,  or  makes 
a  new  contract  with,  the  principal  debtor,  of  which  new  contract 
the  surety  has  knowledge  and  to  which  he  assents,  he  is  not  thereby 
discharged.  {/Uianis  v.  Way,  32  Conn.  160;  Corlies  v.  Estes^  31 
Vt.  653;  Smith  V.  Winter,  4  Mees.  &  Wels.  454.)  The  compo- 
sition agreement  was  beneficial  to  all  the  creditors  of  the  L.  B.  Smith 
Rubber  Company,  provided  all  entered  into  it.  The  defendant  ant! 
his  trustee  in  insolvency  signed  it  before  the  plaintiff  did.  It  was 
obviously  for  the  advantage  of  each  that  the  other  should  sign. 
Without  some  such  arrangement  neither  could  ever  hope  for  any 
payment  from  that  company.      With  such  an  arrangement  llicrr  was 


596  DISCHARGE   OF   INSTRUMENT.  [ART.  IX. 

a  chance  that  they  might  both  be  paid  in  full.  The  plaintiff  signed 
with  the  knowledge  that  the  defendant  and  his  trustee  had  pre- 
viously signed.  A  composition  deed  implies  not  only  an  agreement 
of  the  debtor  with  each  of  his  creditors,  but  also  an  arrangement  by 
each  creditor  with  each  of  the  others.  The  signing  of  such  a  deed 
by  any  creditor  is  in  some  measure  a  request  to  all  the  others  to 
sign  also.  The  circumstances  of  this  case  show  pretty  clearly  that 
the  defendant  knew  of  and  assented  to  the  act  of  the  plaintiff  in 
signing  the  agreement. 

There  is  no  error  in  the  judgment  complained  of. 

In  this  opinion  the  other  judges  concurred.' 


§  201         CONTINENTAL  LIFE  INSURANCE  CO.  z'.      [§  120] 

BARBER. 

50   CONXECTICUT,   567.  —  1883. 

Carpenter,  J. — This  is  an  action  against  the  executors  of  the 
estate  of  the  late  Gardner  P.  Barber,  deceased,  who,  when  in  life, 
indorsed  a  note  for  $8,000.  The  Superior  Court  found  the  facts  and 
rendered  judgment  for  the  plaintiff.'  The  defendants  appealed. 
The  record  presents  three  questions. 

I.  Was  the  indorser  discharged  by  the  act  of  the  plaintiff?  The 
note  fell  due  July  20th,  1874.  On  the  226.  of  October,  1874,  the 
maker  paid  $4,000,  which  was  duly  indorsed  on  the  note.  In  Decem- 
ber, following,  being  urged  to  pay  the  balance,  and  not  being  able 
to  do  so,  he  executed  another  note  for  the  sum  of  $4,000,  payable  to 
the  order  of  the  plaintiff,  on  demand,  with  interest  semi-annually,  and 
executed  a  mortgage  of  certain  real  estate  to  secure  the  payment 
thereof;  and,  having  caused  the  same  to  be  recorded,  delivered  it 


'  One  who  takes  a  bill  as  a  holder  in  due  course,  and  afterwards  learns  that 
the  drawer  is  the  principal  and  the  accommodation  acceptor  the  surety,  may 
nevertheless  release  the  drawer  without  thereby  discharging  the  acceptor. 
Fentiim  v.  Pocock,  5  Taunt.  192;  Fai-mers',  etc.,  Bk.  v.  Rathbone,  26  Vt.  19; 
Hoivard  Co.  v.  Wdchman,  6  Bosw.  (N.  Y.)  280;  Stephens  v.  Monongahela  Bank, 
88  Pa.  St.  157;  Diversy  v.  Moor,  22  111.  330.  Contra:  Eivin  v.  Lancastei-,  6  B. 
&  S.  571;  Lacv  V.  Lofton,  26  Ind.  324;  Canadian  Bank  v.  Coiinibe,  47  Mich.  358; 
Hall  V.  Capital  Bank,  71  Ga.  715;  Shelton  v.  Htird,  7  R.  I.  403;  Westervelt  v. 
Freeh,  33  N.  J.  Eq.  451. 

But  if  there  are  two  joint  and  several  makers  of  a  note,  and,  after  learning 
that  one  is  surety  for  the  other,  the  holder  releases  or  gives  time  to  the  princi- 
pal, the  surety  is  discharged.  Hubbard  v.  Gurney,  64  N.  Y.  457;  Harris  v. 
Brooks,  21  Pick.  195;  Whitehouse  v.  Hanson,  42  N.  H.  9;  Flynn  v.  Mudd,  27 
111.  323.     See  2  Daniel  on  Neg.  Inst.,  §§  1322-1338.  —  Ed. 


II.]  DISCHARGE   OF   SECONDARY    PARTY.  597 

with  the  note  to  the  plaintiff,  without  the  knowledge  of  Barber. 
The  plaintiff  accepted  the  note  and  mortgage  as  additional  security, 
but  not  in  payment  or  satisfaction  of  the  original  note  or  any  part 
thereof. 

The  claim  is  that  the  legal  effect  of  accepting  the  note  and  mort- 
gage was  to  give  time  to  the  maker  of  the  note  for  ^8,000,  and  so 
discharge  the  indorser. 

The  law  is  well  settled,  hardly  requiring  repetition,  much  less  the 
citation  of  authorities,  that  in  order  to  discharge  the  indorser  by 
giving  time  to  the  maker  there  must  be  a  contract  to  that  effect, 
express  or  implied;  that  is,  the  holder  must  have  put  it  out  of  his 
power  for  the  time  being  to  proceed  against  the  maker.  The 
indorser  cannot  be  deprived  of  the  right,  even  for  a  short  time,  to 
pay  the  holder  and  proceed  forthwith  against  the  maker  for  his 
indemnity.  The  holder  may  not,  during  the  time  for  which  he  has 
agreed  to  extend  credit,  bring  a  suit,  for  that  would  be  a  breach  of 
his  contract.  He  may  not  accept  payment  from  the  indorser  and 
thereby  subject  the  maker  to  an  immediate  suit  by  the  indorser, 
for  that  would  violate,  if  not  the  letter,  certainly  the  spirit  of  his 
contract.      Hence  such  a  contract  operates  to  discharge  the  indorser. 

But  here  is  no  express  contract,  and  we  think  none  can  be  implied. 
It  is  expressly  found  that  the  second  note  was  taken  as  additional 
security  for  the  balance  due  on  the  original  note  and  not  in  satisfac- 
tion of  it  nor  as  a  substitute  for  it.  Both  notes  were  liable  to  be 
sued  at  any  time,  the  one  being  overdue  and  the  other  on  demand. 
Of  course  the  indorser  could  have  paid  the  first  note  and  could  at 
once  have  brought  a  suit  against  the  maker.  He  was  also  entitled 
to  the  additional  security,  and  could  at  once  have  brought  a  suit  on 
that  note,  and  could  also  have  proceeded  to  foreclose  the  mortgage. 
Instead  of  being  prejudiced  by  the  transaction  it  was,  in  theory  at 
least,  a  benefit  to  him. 

The  only  features  of  the  transaction  which  give  any  color  to  the 
defendant's  claim  are  the  facts  that  the  collateral  note,  although  on 
demand,  was  on  interest  payable  semi-annually,  and  was  secured  by 
a  mortgage;  and  it  is  urged  with  considerable  force  that  these  cir- 
cumstances indicate  an  understanding  between  the  parties  that  that 
note  was  to  run  at  least  for  six  months.  They  certainly  indicate 
that  the  parties  contemplated  that  it  might  run  six  months,  but  that 
possibility  does  not  change  the  character  of  the  note  and  convert  it 
from  a  note  payable  on  demand  to  a  note  payable  on  time.  It  was 
still  a  note  due  presently,  and  might  be  sued  at  once  by  the  payee, 
and  the  indorser  of  the  prior  note  might  at  any  moment  have  placed 
himself  in  a  position  to  sue  it. 


598  DISCHARGE   OF   INSTRUMENT.  [ART.  IX. 

The  supposed  analogy  to  notes  ordinarily  taken  by  savingr.  banks, 
insurance  companies,  etc.,  does  not  hold  good.  The  object  in  those 
cases  is  to  loan  money,  to  make  investments;  the  object  here  was 
to  give  additional  security  to  a  loan  previously  made  and  long  since 
overdue,  and  which,  we  may  add,  was  of  a  doubtful  character.  In 
the  former  cases  the  payee  contemplates  a  present  loan  of  money  to 
continue  for  an  indefinite  time  in  the  future;  in  the  latter  he  is 
endeavoring  to  collect  a  loan  previously  made.  It  may  be  a  breach 
of  fair  dealing  to  attempt  to  collect  a  note  of  the  former  description 
at  once,  but  it  by  no  means  follows  that  it  would  be  such  a  breach 
to  attempt  to  collect  one  of  the  latter  description.  Moreover,  the 
very  object  of  making  a  note  payable  on  demand  is  that  the  holder 
may  collect  it  at  any  time  if  he  sees  good  reason  for  doing  so;  and, 
legally  speaking,  he  is  the  sole  judge  of  the  sufficiency  of  the  reason  ; 
and  that  applies  to  the  notes  referred  to  as  well  as  to  the  note  in  this 
case;  so  that  the  analogy,  even  if  it  exists,  or  so  far  as  it  does  exist, 
does  not  avail  the  defendants 

There  is  no  error  in  the  judgment  of  the  court  below.' 


§  201         BRICK  V.  FREEHOLD  NATIONAL  BANK.       [§  120] 

37  New  Jersey  Law,  307.  —  1S75. 
The  opinion  of  the  court  was  delivered  by 

Dalrimple,  J.  — The  defendant  in  this  case  is  sued  as  indorser 
of  a  promissory  note.  The  defence  is,  that  the  plaintiffs,  the 
holders  of  the  note,  received  from  the  maker  a  conveyance  of  certain 
property  as  collateral  security  for  the  payment  of  the  note,  and  that 
because  of  their  failure  to  sell  the  collaterals  and  appropriate  the 
proceeds  of  the  sale  to  the  liquidation  of  the  debt,  coupled  with  the 
fact  that  the  property  held  as  collateral,  had  somewhat  depreciated 

'  The  agreement  for  delay  must  be  binding  upon  the  holder  in  order  to  operate 
as  a  discharge  of  the  indorser.  McLemore  v.  Powc/l,  12  Wheat.  (U.  S.)  554; 
Smith  V.  Erivin,  77  N.  Y.  466;  Gary  v.  White,  52  N.  Y.  13S.  The  taking  of  a 
new  note  or  bond  payable  at  a  future  day  is  construed  as  sufficient  evidence  of 
a  binding  agreement  to  suspend  the  enforcement  of  the  original  obligation 
until  the  maturity  of  the  new  obligation.  English  v.  Darley,  2  Bosaug.  &  P. 
61;  Hubbard  \.  Gu7-iiey,  64  N.  V.  457;  Siebeneck  v.  Anchor  Bank,  ill  Pa.  St.  187; 
Hamilton  v.  Prouty,  50  Wis.  592.  But  a  reservation  of  rights  against  the  surety 
is  effective.  Tobiy  v.  Ellis,  114  Mass.  120;  Hagcy  v .  Hill,  75  Pa.  St.  loS;  Diipee 
V.  Blake,  148  111.  465;  Sohier  v.  Loring,  6  Cush.  (Mass.)  537;  National  Bank  v. 
Biglcr,  83  N.  Y.  51.  Extension  to  the  maker  of  time  to  answer  in  an  action 
brought  by  the  holder,  is  not  an  extension  of  time  of  payment.  German-American 
Bank  v.  Niagara,  etc.  Co.,  13  App.  Div.  (N.  Y.)  450.  —  Ed. 


^II-J  PAYMENT   BY    SECONDARY    PARTY.  599 

in  value,  between  the  time  of  the  maturity  of  the  note  and  the  com- 
mencement of  the  suit,  the  right  of  action  as  against  the  defendant 
who  is  an  accommodation  indorser,  is  lost.  This  proposition  can- 
not be  maintained.  It  is  well  settled  that  mere  delay  by  the 
creditor  to  sue  the  principal  debtor  will  not  discharge  the  surety, 
for  the  obvious  reason  that  the  surety  may  at  any  time  discharge 
his  obligation  to  the  creditor,  and  thus  make  the  principal  his 
debtor.  The  same  rule  holds  when  collaterals  are  pledged  by 
the  principal  debtor.  The  surety  may  at  any  time  after  the  debt 
becomes  due  and  owing,  discharge  it  and  take  the  collaterals. 
The  law  implies  no  contract  on  the  part  of  the  creditor  to  proceed 
on  the  collaterals  before  he  can  sue  the  surety.  Nor  are  the 
rights  of  the  parties  affected  by  the  fact  that  the  collaterals  have 
depreciated  between  the  time  of  the  maturity  of  the  debt,  for  pay- 
ment of  which  they  were  pledged,  and  the  commencement  of  suit 
against  the  surety.  These  principles  are  recognized  as  sound  law 
by  the  Court  of  Appeals  of  New  York,  in  the  well-considered  case 
of  Schroeppell  v.  Shaiv,  reported  in  3  Comstock,  446,  ?  Barb 
5S0.     ...  '    :)  • 

Rule  to  show  cause  should  be  discharged.' 


III.  Payment  by  party  secondarily  liable.^ 

§  202  GARDNER  v.  MAYNARD.  [§  121] 

7  Allen  (Mass.),  456.  —  1863. 

Contract  against  the  acceptor  of  a  draft  for  $1,000,  drawn  by 
Sandford  C.  Gardner,  in  favor  of  J.  &  C.  Levy  &  Co.,  upon  the 
defendant.     The  draft  was  duly  indorsed  and  accepted. 

At  the  trial  in  the  superior  court,  before  Allen,  C.  J.,  it  appeared 
that  the  draft  was  protested  for  non-payment,  and  returned  to  Levy 
&  Co.,  and  was  afterwards  returned  to  the  drawer,  who  assigned  it 
by  bill  of  sale  to  the  plaintiff,  with  the  indorsement  of  Levy  &  Co. 
remaining  uncancelled.     A  witness  testified  that  he  saw  the  draft 


■  If  a  secured  creditor  part  with  the  securities,  the  surety  is  discharged. 
2  Daniel  on  Neg.  Inst.,  §  1311. 

In  New  York  the  doctrine  prevails  that  a  surety  may  call  on  the  creditor  to 
proceed  promptly  against  the  principal,  and  failure  to  do  so  will  discharge  the 
surety  to  the  extent  of  the  loss  suffered  by  the  delay.  Pain  v.  Packard,  13  Johns. 
174;  Newcomb  v.  Hah\  90  N.  Y.  326,  329.  But  the  doctrine  does  not  extend  to 
indorsers  for  value.  Tritnblc  v.  Thome,  16  Johns.  152;  Newcomb  v.  Hale, 
supra.  —  Ed. 

*  See  §  80  [50],  ante;  see  p.  378,  a7ite.  —  En. 


600  DISCHARGE    OF   INSTRUMENT.  [ART.   IX. 

indorsed   by  one  of  the  firm  of   Levy  &  Co.,  and   did  not  see  any 
money  paid  at  that  time. 

Upon  these  facts,  the  chief  justice  directed  a  verdict  for  the 
defendant,  which  was  accordingly  rendered;  and  the  plaintiff  alleged 
exceptions. 

Metcalf,  J.  ^—  These  exceptions  must  be  overruled  and  judgment 
rendered  on  the  verdict  for  the  defendant,  upon  the  authority  of 
Beck  V.  Rohley,  i  H.  Bl.  89,  n.  That  case  and  this  are  alike  in  all 
particulars.  In  both,  the  bill  was  made  payable,  not  to  the  drawer's 
own  order,  but  to  a  third  party  who  indorsed  it,  was  accepted  by  the 
drawee,  but  afterv/ards  was  dishonored  by  his  refusing  to  pay  it,  and 
was  taken  up  from  the  indorser  by  the  drawer,  with  the  indorser's 
name  remaining  uncancelled.  In  that  case  it  was  decided  that  the 
bill  was  not  negotiable,  and  that  the  drawer  could  not  reissue  it. 
And  that  decision  has  never  been  overruled  or  denied,  but  is  cited  as 
established  law  in  all  the  books  that  treat  of  bills  of  exchange.     (See, 

1  Steph.  N.  P.  863;  Story  on  Bills,  §  223;  Guild  x.  Eager,  17  Mass. 
615;  Opinion  of  Patteson,  J.,  in  Williams  v.  J^ames,  15  Ad.  &  El. 
N.  S.  505.)  The  doctrine  of  that  decision  is,  that  a  bill  of  exchange 
cannot  be  indorsed  or  negotiated,  after  it  has  once  been  paid,  if  such 
indorsement  or  negotiation  would  make  any  of  the  parties  liable, 
who  would  otherwise  be  discharged.  (Bayley  on  Bills,  6th  ed.  166, 
167;  Chit.,  Bills,  i2th  Am.  ed.  254,  255.)  As  the  first  indorser  of 
a  bill  is  liable  to  every  subsequent  bona  fide  holder,  although  the  bill 
be  fraudulently  circulated,  it  follows  that  if  he  leaves  his  name 
thereon,  after  he  is  entitled  to  a  discharge,  he  exposes  himself  to 
liability  to  such  holder.  Therefore  the  bill  is  held  not  to  be  nego- 
tiable, in  such  case. 

This  rule  of  law  applies  only  to  cases  in  which  the  negotiation  of 
a  bill  by  the  drawer,  after  he  has  taken  it  up  on  its  being  returned 
to  him  dishonored,  would  expose  a  discharged  party  to  a  new  lia- 
bility. (See  Callow  v.  Lawrence,  3  M.  &  S.  95;  Hubbard  v.  Jackson, 
4  Bing.  390;  Bayley,  Chit.,  and  17  Mass.  ubi  supra  j  Mead  v.  Small, 

2  Greenl.  207.) 

Exceptions  overruled.' 


§  202  BLENN  v.  LYFORD.  [§  I2l] 

70  Maine,  149.  —  1S79. 

Appleton,  C.  J.  —  This  is  an  action  of  assumpsit  on  the  following 
note :  — 

•  Accord:  Price  v.  Sharp,  2  Ired,  Law  (N.  C.)  417.  —  Ed. 


Ill-]  PAYMENT   BY   SECONDARY    TARTY.  6oi 

St.  Albans,  Me.,  Dec.  2,  1871. 
Seven    months   from  date,  value  received,  I    promise   to   pay   M.  E.  Rice,   or 
order,  three  hundred  dollars,  at  any  bank  in  Bangor. 

r™,  .  11.     II.     LVKORI). 

[Ihe  note  was  indorsed  in  blank]  M.  E.  Rice. 

[The  following  words  were  also  on  the  back  of  the  note,  erased  with  ink  but 
legible]:   Holden  without  demand  or  notice.     M.  E.  Rice. 

Granting  the  presumption  that  the  plainti.T  is  a  ^^//^//Vr  holder 
for  value  of  the  note  before  maturity,  that  presumption  may  be 
overcome  by  proof. 

It  appears  from  the  testimony  that  the  note  was  indorsed  to  one 
Richardson,  for  value,  in  the  April  following  its  date;  that  it  was  not 
paid  at  maturity,  and  that  about  three  months  after  its  dishonor  he 
delivered  it  to  Rice,  the  payee. 

The  plaintiff  then  received  the  note  in  suit,  when  overdue.  The 
note  remaining  unpaid  after  maturity  was  dishonored,  and  it  was  the 
duty  of  the  indorsee  to  make  inquiries  concerning  it.  If  he  takes  it, 
though  he  gave  a  full  consideration  for  it,  he  does  so  on  the  credit  of 
the  indorser.  He  holds  the  note  subject  to  all  equities  with  which  it 
may  be  incumbered.  As  the  plaintiff  is  the  indorsee  of  a  dishonored 
note,  it  was  competent  for  the  defendant  to  show  that  it  was  an 
accornmoda*-ion  note,  and  that  it  had  been  paid  by  the  party  for 
whose  accommodation  it  was  given. 

That  the  note  was  for  the  accommodation  of  the  payee  is  abun- 
dantly shown  by  his  receipt  of  the  date  of  February  22,  1872,  as  well 
as  by  the  testimony  offered  and  excluded. 

The  note  being  for  the  accommodation  of  Rice,  it  was  his  duty  to 
pay  it.  The  note  being  found  after  dishonor  in  the  hands  of  the  one 
bound  to  pay  it,  the  presumption  is  that  he  paid  it.  (2  Par.  N.  &  B. 
220  )  It  was  competent  to  show  that  in  fact  he  paid  it,  but  the 
answer  to  an  inquiry  whether  the  note  was  paid  by  Rice  was 
excluded.      This  was  erroneous. 

Assuming  the  note  to  have  been  paid  by  Rice,  it  was  the  same  as 
if  paid  by  the  maker.  It  was  paid  by  che  party  whose  duty  it  was 
to  pay  it.  The  purpose  for  which  it  was  given  has  been  accom- 
plished. The  negotiability  of  a  note  ceases  after  its  payment  by  the 
party  who  should  rightfully  pay  it.  "  Now  it  cannot  be  denied," 
says  Denman,  C.  J.,  in  Lazarus  v.  Coivie  (43  E.  C.  L.  819),  "  thai  if 
a  bill  be  paid  when  due  by  the  person  ultimately  liable  on  it,  it  has 
done  its  work,  and  is  no  longer  a  negotiable  instrument.  .  .  . 
But  the  drawer  of  an  accommodation  bill  is  in  the  same  situation  as 
the  acceptor  of  a  bill  for  value;  he  is  the  person  ultimately  liai)le, 
and  his  payment  discharges  the  bill  altogether." 

Rice,   when  he  took   up  the   note  in  suit,  had  no  right  of  action 


602  DISCHARGE    OF   INSTRUMENT.  [ART.   IX 

against  the  maker,  and  could  not  transfer  to  the  plaintiff  any  better 
right  after  maturity  than  he  had.  (Edwd.  B.  &  N.  564;  Fish  v. 
Fretich,  15   Gray,  520;    Tucker  v.  Smith,  4  Maine,  415.) 

In  the  cases  cited  by  the  plaintiff  there  are  most  important  differ- 
ences from  the  one  under  consideration.  In  Bank  v.  Croiv  (60  N.  Y. 
85),  the  plaintiffs  were  the  indorsees  of  the  note  for  value  and  before 
maturity,  and  were  consequently  to  be  protected.  In  Thompson  v. 
Shepard  {12  Met.  311),  it  was  held  that  the  indorsee  of  a  note,  who 
receives  it  for  value  from  the  second  indorser,  after  it  has  been  dis- 
honored by  the  maker,  can  recover  thereon  against  the  maker, 
although  he  knew  when  he  received  it  that  as  between  the  maker 
and  first  indorser  it  was  an  accommodation  note.  But  this  is  upon 
the  principle  affirmed  by  the  court  in  Woodman  v.  Churchill  (52 
Maine,  58),  that  where  the  first  indorsee  of  a  promissory  note 
acquires  a  right  of  action  against  the  maker,  by  being  a  bona  fide  pur- 
chaser, without  notice  and  before  maturity,  he  can  transfer  a  good 
title  as  well  after  as  before  the  note  becomes  due. 

Exceptions  sustained.  Action  to  stand  for  trial.' 


IV.  Payment  for  honor. 

See  Art.  XN ^  post,  pp.  658-660. 


Accord:  Merrill  v.  First  N,  j5.,g4Cal.  59;  Cottrellv.  Walkins,  89  Va.  801. — Ed. 


ARTICLE    X. 

Bills  of  Exchange:     Form  and  Interpretation. 
I   Form. 

I.   Formal  Requisites  Generally. 
§  210  See  Article  II.     Ante,  pp.  161-285.  [§  126] 


2,  The  Drawee  or  Drawees. 

{a)  Must  be  certain. 

§20  6V^  Article  II.   Ante,  pp.  270-275.  [§  i] 

{b)  May  be  joint,  but  not  alternative  or  successive. 

§  212     TOMBECKBEE  BANK  v.  DUMELL  &  LYMAN.    [§  128] 

5  Mason  (U.  S.  C.  C.)  56.—  1828. 

\Reported  herein  at  p.  639.]  ' 


§  212  JACKSON  V.  HUDSON.  [§  128] 

2  Campbell,  447.  —  iSro. 

This  was  an  action  against  the  defendant  as  acceptor  of  a  bill  of 
exchange,  which  was  drawn  and  accepted  in  the  following  form: 

London,  30th  December,  1809. 
Two  months  after  date,  pay  to  my  order  157/.,  for  value  received. 

F.  Jackson. 
To  Mr.  I.  Irving 
Accepted,  I.   Irving 
Accepted,  Jos.  Hudson,  payable  at  Mr.  Hudson's,  132  Oxford  street. 

The  first  count  of  the  declaration  stated,  that  the  bill  was  directed 
to  Irving;  the  second  took  no  notice  of  there  being  any  drawee;  and 

'  An  acceptance  by  some  one  or  more  of  several  drawees,  but   not  by  ail,  is  a 
qualified  acceptance.     See  Neg.  Inst.  L.,  §  229  [141]-  subsec.  5.  —  Ed. 

[603] 


6o4  BILLS   OF   EXCHANGE.  [ART.  X. 

both  averred  that  the  defendant  accepted   it,    "according  to   the 
usage  and  custom  of  merchants."  • 

Garro7u  for  the  plaintiff  stated,  and  undertook  to  prove,  that  the 
plaintiff  having  dealings  with  Irving  concerning  the  sale  of  goods, 
refused  to  sell  him  any  more,  unless  the  defendant  would  become 
his  surety;  that  the  defendant  agreed  to  this;  that  goods  to  the 
value  of  157/.  were  in  consequence  sold  by  the  plaintiff  to  Irving; 
that  the  bill  in  question  was  drawn  for  the  price  of  them,  and  that 
the  defendant  with  a  knowledge  of  all  these  facts,  had  put  his  name 
upon  the  bill  as  acceptor.  He  must,  therefore,  be  considered  as  hav- 
ing accepted  the  bill  jointly  with  Irving;  and  as  he  had  not  pleaded 
in  abatement,  he  was  separately  liable  in  the  present  action. 

Lord  Ellenborgugh.  — If  you  had  declared,  that  in  considera- 
tion of  the  plaintiff  selling  the  goods  to  Irving,  the  defendant  under- 
took that  the  bill  should  be  paid,  you  might  have  fixed  him  by  this 
evidence.  But  I  know  of  no  custom  or  usage  of  merchants,  accord- 
ing to  which,  if  a  bill  be  drawn  upon  one  man,  it  may  be  accepted 
by  two.  The  acceptance  of  the  defendant  is  contrary  to  the  usage 
and  custom  of  merchants.  A  bill  must  be  accepted  by  the  drawee, 
or  failing  him,  by  some  one  for  the  honor  of  the  drawer.  There 
cannot  be  a  series  of  acceptors.' 

The  defendant's  undertaking  is  clearly  collateral,  and  ought  to 
have  been  declared  upon  as  such. 

Plaintiff  nonsuited. 


§  212  [128]  Anon.  12  Mod.  447.  (1701).  A  bill  of  exchange  was 
directed  to  A.  or,  in  his  absence,  to  B.,  and  began  thus:  "  Gentle- 
men, Pray  pay."  The  bill  was  tendered  to  A.,  who  promised  to  pa\' 
it  as  soon  as  he  should  sell  such  goods;  and  in  an  action  against  him 
for  non-payment,  the  declaration  was  of  a  bill  directed  to  him  with- 
out any  notice  of  B.,  and  Holt  held  it  well.^ 

'  There  seems  to  be  no  direct  authority  upon  this  proposition  of  the  Neg. 
Inst.  L.,  §  212  [128].  In  the  case  above  but  one  drawee  is  named  and  the  con- 
clusion is  that  no  other  person  can  accept.  Of  course  successive  "  drawees  in 
case  of  need  "  may  be  named  in  the  bill.     Neg.  Inst.  L.,  §  215  [131].  —  Ed. 

''■  In  this  case  B.  may  have  been  a  "  drawee  in  case  of  need;  "  if  not,  it  is 
contrary  to  the  statutory  rule.  A  note  cannot  be  made  payable  by  two  makers 
in  the  alternative.     Ferris  v.  Bond,  4  B.  &  Aid.  679.  —  Ed. 


II.]  INTERPRETATION.  605 

3.   Referee  ix  Case  of  Need. 

§215  Chitty  ox  Bills  of  Exchange,   Etc.,  p.  18S.     [§131] 

When  the  drawer  has  any  apprehension  that  the  drawee  will  either 
not  accept,  or  not  pay  the  bill,  he  may,  as  a  matter  of  precaution, 
to  prevent  the  expenses  and  inconveniences  resulting  from  a  return 
of  the  bill,  require  the  holder  in  such  an  event,  to  apply  to  a  third 
person,  named  in  the  bill  for  that  purpose.  This  requisition  is  inti- 
mated by  writing  in  the  corner  of  the  bill,  under  the  drawee's  address, 

these   words,  '' Au  besoin  chez  Messrs. ,  at ,"  or,    in   other 

words,  "  In  case  of  need  apply  to  Messrs. ,  at ."     This,  in 

effect,  points  out  one  or  more  persons  whom  the  drawer  is  desirous, 
in  case  of  refusal  or  failure  by  the  drawee,  to  become  parties  to  the 
bill,  in  the  nature  of  an  acceptor  or  payer  for  honor;  and  is  valid 
and  usual  on  the  Continent,  though  we  have  JLst  seen  that  there 
cannot  be  a  series  of  acceptors,  (i  Pardess.  351,  394,  437-8;  jfack- 
son  V.  Hudson,  2  Campb.  447.)  The  holder  is  bound  to  apply  to  the 
parties  so  addressed,'  (i  Pardess.  438),  and  who  may  accept  and 
pay  without  previous  protest,  in  which  respect  he  differs  from  an 
acceptor  supra  protest  (i  Pardess.  438);  and  the  party  so  paying  has 
a  right  to  sue  the  drawer  for  the  amount,  (i  Pardess.  438.)  It 
should  seem,  however,  that  the  introduction  of  these  words  rather 
imports  an  apprehension  that  the  bill  will  not  be  regularly  accepted 
or  paid,  and  therefore  tends  to  diminish  the  credit  which  might 
otherwise  be  attached  to  the  bill  without  such  desire  being  expressed.^ 


II.  Interpretation. 

I.   Bill  Not  an  Assignment  of  Funds. 

§  211  HOLBROOK  V.   PAYNE.  [g  127] 

151    M.VSSACHUSETTS,    383. —  I89O. 

Plaintiff  by  "  trustee  process  "  attached  funds  in  the  hands  of 
the  town  of  Winchester  belonging  to  defendant.  Alexis  Cutting 
intervened  as  claimant  of  the  funds. 

'  This  seems  to  have  been  so  before  the  enactment  of  the  Bills  of  Exchange 
Act,  §  15,  and  the  Neg.  Inst.  L.,  ^  215  [131].  See  Chalmers,  Hills  of  E.xchangc 
Act  (5th  ed.)  pp.  38-39-  —  En. 

'There  is  little  English  or  American  authority  upon  the  "  referee  in  case  of 
need."  See  Leonard  v.  Wilson,  4  Tyrwh.  415;  In  re  Leeds  Bankhij;  Co.,  L.  R. 
I  Eq.  I.  —  Ed. 


6o6  BILLS   OF    EXCHANGE.  [ART.  X. 

The  town  owed  defendant  $2 1 7. 2 7  on  an  account  stated.  Defendant 
gave  Cutting  this  order:  "Winchester,  July  12th,  '88.  Town  of 
Winchester.  Pay  to  the  order  of  A.  Cutting  ninety  and  thirty-two 
hundredths  dollars,  value  received,  and  charge  the  same  to  account 
of  H.  B.  Payne."  He  gave  similar  orders  amounting  to  $65.27  to 
four  other  persons,  who  also  appear  as  claimants.  The  orders  were 
all  left  with  the  selectmen  of  the  town,  where  they  continued  to 
remain,  but  were  never  formally  accepted. 

Holmes,  J. — The  defendant  in  this  action  has  been  defaulted, 
and  the  question  before  us  is  whether  the  plaintiff  or  the  claimant 
Cutting  is  entitled  to  a  certain  part  of  the  debt  due  from  the  trustee 
to  the  defendant. 

There  is  no  doubt  that  an  order  for  a  specific  fund,  identified  by 
the  order  itself,  may  be  a  good  assignment.  {Kiugman  v.  Perkins, 
105  Mass.  III.)  We  assume  in  favor  of  the  claimant  that  an  equitable 
assignment  to  him  of  a  part  of  the  debt  would  be  good  as  between 
him  and  the  plaintiff  upon  trustee  process.  {Dana  v.  Third  National 
Bank,  13  Allen,  445,  447;  James  v.  Newton,  142  Mass.  366,  374.) 
Our  difficulty  is  to  discover  any  ground  for  saying  that  the  instru- 
ment relied  upon  constituted  such  an  assignment. 

On  its  face,  the  order  given  to  the  claimant  by  the  defendant  does 
not  refer  to  a  particular  fund  or  debt,  but  is  an  ordinary  negotiable 
draft,  or  unaccepted  bill  of  exchange,  drawn  upon  the  town  on  the 
o-eneral  credit  of  the  drawer.  An  indorsement  of  the  instrument  by 
the  claimant  would  have  given  the  indorsee  a  right  of  action  in  his 
own  name  against  the  drawer,  if  the  draft  should  be  dishonored.  But 
the  fact  that  the  order  is  a  negotiable  instrument  on  its  face  shows 
that  it  is  not  drawn  against  a  particular  fund.  If  it  were  drawn 
against  a  particular  fund,  it  would  not  be  negotiable.'  (^Wheeler  v. 
Souther,  4  Cush.  C06,  607;  Harrinian  v.  Sanborn,  43  N.  H.   128.) 

The  case  is  stronger  for  holding  a  check  upon  a  bank  to  be  an 
assignment,  than  it  is  for  holding  an  ordinary  draft  to  be  so. 
A  check  is  supposed  to  be  drawn  against  a  fund  deposited,  for  which, 
to  be  sure,  the  bank  is  no  more  than  a  debtor;  but  a  debtor  on  the 
implied  term  that  the  creditor  has  a  right  to  split  up  the  debt  at  will, 
and  to  require  part  payments  in  such  amounts,  at  such  times,  and 
to  such  persons  as  he  chooses.  In  general,  the  creditor  has  no  right 
to  draw  above  the  amount  of  his  deposit,  and  would  be  guilty  of  a 
fraud  if  he  obtained  money  or  goods  for  a  check  knowingly  so 
drawn.  Yet  the  weight  of  authority  is  that  a  check  is  not  an  assign- 
ment either  at  law  or  in  equity.'^     {Billiard  v.  Randall,  i  Gray,  605; 

'  See  Neg.  Inst.  L.,  §  22  [3].  —  Ed. 
'  See  Neg.  Inst.  L.,  §  325  [189].  —  Ed. 


n.]  INTERPRETATION.  607 

Dana  v.  Third  Natio7ial  Bank,  13  Allen,  445,  447;  Attorney-General 
V.  Continental  Life  Ins.  Co.,  71  N.  Y.  325;  First  National  Bank  of 
Mount  yoy  V.  Gish,  72  Penn.  St.  13;  Hopkinson  v.  Forster,  L.  R.  19 
Eq.  74;  Schroeder  v.  Central  Bank  of  London,  24  W.  R.  710.  See 
Laclede  Bank  v.  Schuler,  120  U.  S.  511,  514.) 

A  fortiori,  the  same  rule  must  hold  good  of  an  ordinary  draft  unac- 
cepted, which  does  not  import  the  existence  of  a  debt  from  the 
drawee  to  the  drawer,  but  leaves  the  mode  of  the  drawee's  reim- 
bursement to  such  private  arrangements  as  may  exist  between  the 
drawer  and  himself.  And  so  are  the  decisions:  {Whitney  \ .  Eliot 
Nat.  Bank,  137  Mass.  351,  355,  356;  National  Exchange  Bank  v. 
McLoon,  73  Maine,  498,  511;  Bank  of  Commerce  v.  Bogy,  44  Mo.  13. 
See  First  Nat.  Bank  of  Canton  v.  Dubuque  Southwestern  Railway,  52 
Iowa,   378.) 

There  is  no  extrinsic  fact  in  the  present  case  which  gives  the 
document  a  different  effect  from  that  which  results  from  its  tenor, 
if  it  be  possible  that  its  effect  should  be  varied  by  parol.  (See 
Whitney  v.  Eliot  Nat.  Bank,  supra;  Griffin  v.  Wheathcrby,  L.  R.  3 
Q.  B.  753,  759;  First  Nat.  Bank  of  Canton  v.  Dubuque  Southwestern 
Railway,  52  Iowa,  378.)  The  defendant  had  done  work  for  the  town, 
and  his  only  right  to  draw  was  in  respect  of  the  price  of  his  work. 
If  we  assume  this  fact  to  have  been  known  to  all  parties  concerned, 
still  it  only  shows  that  the  town  was  known  to  have  means  of 
indemnifying  itself  if  it  saw  fit  to  pay.  It  does  not  enlarge  the  mean- 
ing of  the  draft  beyond  that  which  it  bears  on  its  face,  of  a  general 
request  to  the  town  to  pay.  Even  a  reference  to  a  fund  out  of 
which  a  drawee  may  indemnify  himself  will  not  take  away  the  nego- 
tiable character  of  the  draft.'  We  may  remark  that  the  concluding 
words  of  the  draft  in  question  are  "  charge  to  account  of."  In 
some  of  the  others,  they  are  "charge  to  the  account  of,"  which  is 
slightly  more  specific.  But  we  do  not  see  any  sound  distinction  in 
favor  of  the  latter.  If  the  town  had  accepted  the  order,  having 
power  to  do  so,  it  would  have  become  liable  on  a  direct  and  absolute 
contract  to  the  claimant,  very  likely  having  a  right  to  withhold  an 
equal  amount  of  its  debt  to  the  defendant.  ]5ut  mere  retention  of 
the  draft  was  not  acceptance.*  {Overman  v.  Hoboken  City  Bank,  2 
Vroom,  563.) 

Trustee  charged.     Judgment  for  plaintiff." 


iNeg.  Inst.    L.,  §  22  [3];  ante,  pp.  183-189.  —  Ed. 

'  See  §  225  [137].  —  Ed. 

3  As  to  whether  a  bill  is  an  assignment  there  has  been  a  conflict  of  authority, 
especially  where  the  bill  is  drawn  for  the  whole  of  the  fund.  Sec  i  Daniel  on 
Neg.   Inst.,  g§  15-23;  2  Am.  &  Eng.  Encyc.  L.  (2nd  ed.),  pp.  1062-1064.     That  a 


6o8  BILLS   OF    EXCHANGE.  [ART.  X. 

2.   Inland  and  Foreign  Bills. 

§  213  YALE  V.   WARD.  [§  129] 

30  Texas,  17.  —  1S67. 

The  bill  on  which  suit  was  brought  was  in  these  words,  with  the 
indorsement  of  "Henderson,  Terry  &:  Co.,"  across  the  face  of  the 
note:  — 

$307.78.  New  Orleans,  2d  May,  1861. 

On  the  I2lh  day  of  December,  after  date,  pay  to  the  order  of  C.  Yale,  Jr.  & 
Co.,  $307.78,  value  received,  and  charge  the  same  to  account  of 

Matt.  Ward. 
To  Messrs.  Henderson,  Terry  &  Co. 

To  it  was  attached  the  usual  formal  protest,  dated  "  United  States 
of  America,  State  of  Louisiana,"  by  a  "  notary  of  the  parish  of  New 
Orleans,  State  of  Louisiana,"  14th  December,  1861. 

Willie,  J.  .  .  .  There  being  no  allegation  to  the  contrary, 
we  must  treat  the  draft  upon  which  this  suit  is  founded  as  a  domestic 
bill  of  exchange.  Neither  the  place  where  the  draft  was  drawn,  nor 
where  it  was  accepted,  is  stated  in  the  petition.  The  instrument 
itself,  made  part  of  the  petition,  purports  to  have  been  drawn  at 
New  Orleans;  but  there  is  no  averment  that  this  place  is  beyond  the 
limits  of  Texas.  This  court  has  held,  that  it  will  not  take  judicial 
notice  of  the  division  of  other  States  into  towns,  cities,  etc.,  and 
that  knowledge  of  the  fact  that  any  place  is  within  a  different  State 
of  the  Union  must  be  derived  from  the  allegations  of  the  parties  or 
the  evidence  contained  in  the  record.  [Andreti's  v.  Hoxie,  5  Tex. 
185;  4  Tex.  420.) 

The  rights  of  the  parties  to  this  contract,  therefore,  must  be  ascer- 
tained, and  their  liabilities  fixed  according  to  the  law  of  our  own 
State.'     .      .     . 


bill  drawn  for  the  whole  of  a  fund  is  not  anassignment.  z&t.Shand  \ .  Du  Buisson, 
18  Eq.  Cas.  2S3;  First  X.  B.  v.  Dubuque  S.  R.  R.,  52  Iowa,  378;  Btish  v.  Foote,  58 
Miss.  5;  Bank  v.  Bogy,  44  Mo.  15.  But  an  order  for  a  payment  of  a  particular, 
specified  debt  in  full,  is  an  assignment.  Lewis  v.  Batik,  30  Minn.  135;  Brady  v. 
Chadbonrne  (Minn  ),  70  N.  W.  Rep.  981;  Moore  v.  Davis,  57  Mich.  255.  —  Ed. 

1  Accord:  Kearney  v.  King,  2  B.  &  Aid.  301;  Riggin  v.  Collier,  6  Mo.  568. 
A  bill  drawn  and  dated  in  Philadelphia,  payable  in  London,  but  actually  deliv- 
ered by  the  drawers  in  London,  is  to  be  treated  as  a  foreign  bill  in  the  hands  of 
a  bona  fide  holder.  Lennig  v.  Ralston,  23  Pa.  St.  137-  A  bill  drawn  and  deliv- 
ered in  Wisconsin,  but  dated  and  payable  in  Illinois,  is  an  inland  bill,  as  between 
the  parties.      Straivbridge  v.  Robinson,  10  111.  (5  Gilman)  470.  —  Ed. 


n.]  INTERPRETATION.  609 

§  214  3.  Bill  Treated  as  Promissory  Note.  [§  130] 

FUNK  V.  BABBITT. 
156  Illinois,  4p8.  —  1S95. 

{^Reported  herein  at  p.  272.]  ' 

'  "Where  a  party  frames  his  instrument  in  such  a  way  that  it  is  ambiguous 
whether  it  be  a  bill  of  exchange  or  a  promissory  note,  the  party  holding  it  is 
eniitled  to  treat  it  either  as  one  or  the  other,  and  the  plaintiff  ought  not  to  be 
defeated  by  the  party  who  framed  the  instrument  being  allowed  to  say  that  it  is 
a  bill  of  exchange  "  [where  such  party  has  had  no  notice  of  dishonor].  EJis  v. 
Bury,  6  B.  &  C.  433.  See  also  Lloyd  v.  Oliver,  iS  Q.  B.  471;  Heise  v.  Bunipass, 
40  Ark.  545;  4  Am.  &  Eng.  Encyc.  Law  (2d  ed.),  pp.  1 19-123. 

See  cases,  ante,  pp.  270-272. — Ed. 


NEGOT.  INSTRUMENTS  —  39. 


ARTICLE    XI. 

Acceptance  of  Bills  of  Exchange. 

I.  Form  and  effect. 

I.   Acceptance  Must  Be  in  Writing  and  Signed    By   Drawee. 

(a)    IVriti/ig  and  signature. 

§  220  SPEAR  V.   PRATT.  [§  132] 

2  Hill(N.  Y.)  5S2.  —  1S42. 

Action  against  Pratt  as  acceptor.  Judgment  for  plaintiff.  The 
defendant's  name  was  written  across  the  face  of  the  bill;  and  the 
question  was  whether  this  was  such  an  acceptance  as  is  required  by 
statute. 

By  the  Court ^  Cowen,  J.  — Any  words  written  by  the  drawee  on  a 
bill,  not  putting  a  direct  negative  upon  its  request,  as  "  accepted," 
"  presented,"  "seen,"  the  day  of  the  month,  or  a  direction  to  a 
third  person  to  pay  it,  x?,  prima  facie  a  complete  acceptance,  by  the 
law  merchant.  (Bayley  on  Bills,  163,  Am.  ed.  of  1836,  and  the 
cases  there  cited.)  Writing  his  name  across  the  bill,  as  in  this  case, 
is  a  still  clearer  indication  of  intent,  and  a  very  common  mode  of 
acceptance.  This  is  treated  by  the  law  merchant  as  a  written 
acceptance  —  a  signing  by  the  drawee.  "  It  may  be,"  says  Chitty, 
"  merely  by  writing  the  name  at  the  bottom  or  across  the  bill;  " 
and  he  mentions  this  as  among  the  more  usual  modes  of  acceptance.. 
(Chitty  on  Bills,  320,  Am.  ed.  of  1839.) 

It  is  supposed  that  the  rule  has  been  altered  by  i  R.  S.  757  (2d  ed.) 
§  6.  This  requires  the  acceptance  to  be  in  writing,  and  signed  by 
the  acceptor  or  his  agent.  The  acceptance  in  question  was,  as  we 
have  seen,  declared  by  the  law  merchant  to  be  both  a  writing  and  a 
signing.  The  statute  contains  no  declaration  that  it  should  be  con- 
sidered less.  An  indorsement  must  be  in  writing  and  signed;  yet 
the  name  alone  is  constantly  holden  to  satisfy  the  requisition.  No 
particular  form  of  expression  is  necessary  in  any  contract.  The 
customary  import  of  a  word,  by  reason  of  its  appearing  in  a  particu- 
'ar  place,  and  standing  in  a  certain  relation,  is  considered  a  written 

[610] 


I-  ^-l  FORM    REQUIRED.  6ll 

expression  of  intent  quite  as  full  and  effectua.  as  if  pains  had  been 
taken  to  throw  it  into  the  most  labored  periphrase.  It  is  said  the 
revisers,  in  their  note,  refer  to  the  French  law  as  the  basis  of  the 
legislation  which  they  recommend;  and  that  the  French  law  requires 
more  than  the  drawee's  name  —  the  word  accepted,  at  least.  That 
may  be  so;  but  it  is  enough  for  us  to  see  that  both  the  terms  and 
the  spirit  of  the  act  may  be  satisfied  short  of  that  word,  and  more 
in  accordance  with  the  settled  forms  of  commercial  instruments 
in  analogous  cases.  The  whole  purpose  was  probably  to  obviate 
the  inconveniences  of  the  old  law,  which  gave  effect  to  a  parol 
acceptance. 

New  trial  denied.' 


(b)  Only  the  drawee  can  accept. 

I  220  WALTON  V.   AVIFLIAMS.  [g  132] 

44  Alabama,  347.  —  1S70. 

Action  against  James  W.  Walton  as  acceptor  of  a  bill  addressed 
to  James  J.  Walton.  Defendant  offered  to  prove  that  he  signed  as 
indorser,  but  the  court  excluded  the  evidence.  Judgment  for 
plaintiff. 

Saffold,  J.  —  The  only  evidence  that  the  defendant  accepted  the 
bill,  is  his  signature  across  its  face.  It  is  where  the  acceptor's  signa- 
ture is  usually  found,  and  in  the  absence  of  proper  rebutting  testi- 
mony this  would  be  sufficient  proof  of  the  fact,  if  it  was  directed  to 
him,  or  without  direction  to  anyone.  But  the  name  of  James  J. 
W^alton  is  also  found  in  the  position  on  the  bill  usually  occupied  by 
the  drawee,  and  he  must  be  considered  the  drawee  as  well  as  the 
drawer. 

'  By  the  English  and  American  decisions  parol  acceptance  of  an  existing  bill 
is  sufficient,  i  Daniel  on  Neg.  Inst.,  §  504  et  seq.;  Sciidder  v.  Bank,  91  U.  S. 
406,  413.  In  England,  since  ig  and  20  Vict.,  c.  97,  the  acceptance  must  be  writ- 
ten on  the  bill.  Bill  of  Exchange  Act,  ^  17,  subsec.  (2).  In  the  U.  S.  where 
there  are  statutory  provisions  they  generally  provide  for  an  acceptance  in  writ- 
ing; but  this  need  not  be  upon  the  bill.  An  acceptance  by  telegraph  has  been 
held  good.  North  Atchison  Batik  v.  Garrctson,  51  Fed.  Rep.  ifJ8,  note  j).  162, 
ante.  See  also  Spaiilding  v.  Atidrcws,  48  Pa.  St.  41 1.  But,  by  ti  221  [133],  of  the 
Neg.  Inst.  L.,  the  holder  is  entitled  to  require  the  acceptance  to  be  written  upon 
the  bill;  and  by  §  222  [134]  an  extrinsic  acceptance  is  binding  only  in  favor  of 
one  to  whom  it  is  shown  and  who  takes  the  bill  on  the  faith  thereof.  This  latter 
provision  is  a  departure  from  the  judicial  decisions  upon  this  point.  Spauldiiig 
V.  Andre-MS,  48  Pa.  St.  411 ;  Jones  v.  Council  Bluffs  Bank,  34  111.  313.  —  En. 


6l2  ACCEPTA.\'CE    OF    BILLS.  [ART.  XL 

^Vhere  a  bill  is  directed  to  a  particular  person,  no  one  but  the 
person  to  whom  it  is  directed  can  accept  it,  except  for  honor.  (Afay 
V.  Kelly  &  Frazier^  27  Ala.  497.)  If  the  defendant  was  an  acceptor, 
he  was  one  supra  protest,  and  his  obligation  was,  that  if  the  bill  was 
not  paid  by  the  drawee  upon  due  presentment  at  its  maturity,  then 
upon  protest  for  non-payment,  and  due  notice  thereof  to  him,  he 
would  pay  it.     (Story  on  Bills  of  Ex.,  §  123;   3  Wend.  491.) 

There  was  no  proof,  in  this  case,  of  protest  and  notice,  and  for 
this  reason  the  charge  of  the  court  was  erroneous. 

The  plaintiff  was  the  payee.  It  was,  therefore,  clearly  competent 
to  show  by  parol  the  intention  of  the  parties,  at  the  time  the  con- 
tract was  entered  into,  with  regard  to  their  several  liabilities  among 
themselves,  and  the  relation  which  they  were  to  bear  to  the  bill. 
(^Bi-anch  Bank  at  Mobile  v.  Coleman,  20  Ala.  140.) 

The  evidence  of  the  defendant,  who  was  a  competent  witness 
under  section  2704  of  the  Revised  Code,  ought  to  have  been 
admitted. 

The  judgment  is  reversed  and  the  cause  remanded.' 


§  220  JACKSON    V.   HUDSON.  [§  132J 

2  Campbell,  447.  —  iSio. 
\_Reporte  i  herein  at  p.  603.] 


{f)  Delivery  neeessaty. 

DuNAVAN  V.  Flvnn,  ii8  Mass.  537.  —  1875.  Gray,  C.  J. — 
It  was  rightly  held  that  the  mere  writing  of  the  acceptance  upon  the 
bill,  not  communicated  to  the  drawer  or  holder,  and  the  detention  of 

'  Accord:  Davis  v.  Clarke,  6  Q.  B.  R.  16;  Smith  v.  Lockridge,  8  Bush.  (Ky.) 
423.  In  Markham  v.  Hazen,  48  Ga.  570,  the  stranger-acceptor  was  held  as 
guarantor. 

If  a  bill  is  directed  to  an  agent  (A.)  and  accepted  by  him  in  the  name  of  his 
principal  (X.  Co.,  by  A.),  no  one  is  bound;  not  the  agent,  for  he  has  not 
accepted;  not  the  principal,  for  it  is  not  the  drawee.  Walker  v.  Bank,  9  N.  Y. 
(5  Seld.)  582. 

If  a  bill  is  directed  to  a  partnership  (A.  B.  &  Co.)  and  is  accepted  by  one  part- 
ner in  his  own  name,  it  has  been  held  that  no  one  is  bound;  not  the  partnership, 
for  it  has  not  accepted;  not  the  partner,  for  he  is  not  the  drawee.  Heenan  v. 
Nash,  8  Minn.  407.  Contra:  07i<en  v.  ]'au  Uster,  20  L.  J.  C.  P.  61.  See  note 
p.  306,  ante.  This  is  to  be  distinguished  from  the  case  of  a  bill  directed  to  two 
or  more  drawees  and  accepted  by  one.  See  §  212  [12S],  §  229  [141],  subsec. 
5. —  Ed. 


I-  2.]  PROMISE    TO   ACCEPT.  6l 


the  bill  in  the  defendant's  custody,  did  not  bind  him,  or  operate  as 
a  payment  of  his  debt  to  the  drawer.  {Clavey  v.  Dolbin,  Cas.  temp. 
Hardw.  278;  Jeune  v.  Ward,  2  Stark.  326;  s.  c,  i  B.  &  Aid.  653;, 
Mason  v.  Barff,  2  B.  &  Aid.  26;  Cox  v.  Troy,  5  B.  &  Aid.  474,  s.  c, 
I  Dowl.  &  Ryl.  38;  Overman  v.  Hoboken  City  Bank,  i  Vroom,  61, 
and  2  Vroom,  563.)  ' 


2.   Promise  to  Accept  Must  Be  ix  Writing,  etc. 
§  223  BANK  OF  MICHIGAN  v.   ELY.  [§  135] 

17  Wendell  (N.  Y.),  508.  —  1837. 

Action  of  assumpsit  against  defendant  as  acceptor.  Defendant 
wrote  his  agents:  "  If  you  want  more  funds,  you  can  make  drafts 
on  me  payable  at  the  office  of  A.  S.  Marvin  &  Co.,  N.  York,  due  in 
August  next.  ...  I  have  authorized  Mr.  D.  D.  Hatch  to  accept 
these  drafts  for  me."  The  agents  wrote  plaintiff  communicating 
the  contents  of  defendant's  letter,  and  subsequently  transmitted 
bills  drawn  on  defendant,  which  plaintiff  discounted  and  passed  to 
the  drawer's  credit.  There  was  no  evidence  that  defendant's  letter 
was  ever  shown  to  plaintiff.     Referees'  report  for  defendant. 

By  the  Court,  Nelson,  Ch.  J.  —  It  is  objected  that  the  acceptance 
of  tiie  defendant,  under  the  circumstances  of  the  case,  is  not  within 
the  provisions  of  the  Revised  Statutes,  however  obligatory  it  maybe 
upon  the  principles  of  the  commercial  law.  The  provisions  of  the 
statute,  I  R.  S.  768,  are  as  follows: 

§  6.  No  person  within  this  State,  shall  be  charged,  as  an  acceptor 
on  a  bill  of  exchange,  unless  his  acceptance  shall  be  in  writing  signed 
by  himself  or  his  lawful  agent. 

§  7.  If  such  acceptance  be  written  on  a  paper  other  than  the  bill, 
it  shall  not  bind  the  acceptor  except  in  favor  of  a  person  to  whom 
such  acceptance  shall  have  been  shown,  and  who,  on  the  faith 
thereof,  shall  have  received  the  bill  for  a  valuable  consideration.^ 

§  8.  An  unconditional  promise,  in  writing,  to  accept  a  bill  before 
it  is  drawn,  shall  be  deemed  an  actual  acceptance  in  favor  of  every 
person  who,  upon  the  faith  thereof,  shall  have  received  the  bill  for 
a  valuable  consideration.' 

'  Acceptance  without  re-delivery  is  ineffective.  Frcund  v.  Importers'  liank^ 
3  Hun  (N.  Y.)  689.  Except  as  provided  in  §  22^,  post.  But  see  2  Ames'  Cases 
on  Bills  and  Notes,  p.  790.  An  acceptance  once  completed  by  delivery  is,  in 
the  absence  of  fraud  on  the  part  of  the  holder  in  procuring  the  acceptance,  irre- 
vocable. Trent  Tile  Co.  v.  Fort  Dearborn  N.  B.,  54  N.  J.  L.  33,  599;  Tori  Dear- 
born N.  B.  v.  Carter,  152  Mass.  34.  —  Ed. 

'  Re-enacted  in  substance  in  Neg.  Inst.  L.,  §  222  [134].  —  Ed. 

^  Re-enacted  in  substance  in  Neg.  Inst.  L.,  §  223  [135].  —  Ed. 


6l4  ACCEPTANCE    OF   BILLS.  [aRT.  XI. 

A  brief  recurrence  to  the  law  as  it  stood  in  this  State  before  the 
adoption  of  these  provisions,  will  aid  in  comprehending  their  object 
^nd  effect.  It  was  settled,  (i)  that  a  parol  promise  to  accept  a  bill 
already  drawn,  was  valid  and  binding,  and  amounted  to  an  actual 
acceptance;  and  (2)  that  a  parol  promise  to  accept  a  future  bill,  or 
one  not  in  existence,  was  not  bmding,  ualess  the  bill  was  taken  by 
the  holder  upon  the  faith  and  credit  of  such  promise.  If  it  was  so 
taken,  then  it  was  binding  and  amounted  to  an  actual  acceptance 
according  to  some  of  the  cases,  (i  Holt,  iSi;  2  Kent's  Comm.  85; 
12  Wendell,  598.)  There  are  Other  authorities  which  require  the 
promise  to  be  in  writing.  Now  by  the  Revised  Statutes,  no  person, 
within  this  State,  can  be  charged  as  an  acceptor  of  a  bill,  unless  the 
acceptance  be  in  writing,  signed  by  himself  or  his  agent;  and  if  such 
acceptance  be  in  writing,  but  not  on  the  bill,  still  the  party  is  not 
charged,  unless  the  fact  be  disclosed  to  the  person  taking  it,  and  he 
on  the  faith  of  such  acceptance,  pay  a  valuable  consideration  for 
the  same.  The  acceptance  here  referred  to  relates  to  a  bill  already 
drawn. 

By  §  8,  an  unqualified  promise  in  writing  to  accept  a  bill  to  be 
thereafter  drawn,  is  deemed  an  actual  acceptance  in  favor  of  any 
one  who  upon  the  faith  of  such  promise  takes  it  for  a  valuable  con- 
sideration. There  is  some  difference  in  the  phraseology  of  §  7  and 
§  8,  in  respect  to  the  circumstances  under  which  the  credit  is  to  be 
given  to  the  promise  to  accept.  The  language  of  the  former,  is  "  in 
favor  of  a  person  to  whom  such  acceptance  shall  have  been  shown, 
and  who  on  the  faith  thereof,"  etc.,  whereas,  the  8th  section  con- 
tains only  the  latter  branch  of  the  sentence;  the  other  was  in  the 
section  as  reported  by  the  revisers,  but  was  subsequently  stricken 
out.  No  reason  can  be  perceived  for  a  distinction  in  this  respect 
between  the  two  cases,  and  we  do  not  believe  any  was  intended  by 
the  legislature;  and  that  the  difference  in  the  phraseology  is  alto- 
gether accidental.  It  can  be  of  no  possible  consequence  to  the 
acceptors  in  what  mode  the  holder  comes  to  the  knowledge  of  the 
acceptance,  whether  by  inspection  or  by  oral  communication;  it  is 
a  matter  that  can  only  concern  the  latter.  If  he  acts  upon  the 
representation  of  a  third  person,  he  incurs  the  risk  of  being  imposed 
upon,  as  he  must,  as  to  the  genuineness  of  the  writing  upon  an 
inspection.  The  language,  "  shall  have  been  shown,"  means  noth- 
ing more  than  to  express  the  idea  that  the  holder  must  know  of  the 
acceptance;  this  is,  indeed,  the  only  effect  of  it.  All  this  is 
undoubtedly  implied  in  the  next  sentence,  and  the  clause,  therefore, 
might  as  well  have  been  omitted  altogether,  as  it  is  in  the  next 
section. 


I.  2.]  PROMISE   TO   ACCEPT.  615 

InPiersonx.  Dunlop  {Cov;^tv,  571),  the  first  case  in  which  this 
doctrine  is  stated,  Lord  Mansfield  remarked:  "  It  has  been  truly 
said,  as  a  general  rule,  that  the  mere  answer  of  a  merchant  to  the 
drawer  of  a  bill,  saying  he  will  duly  honor  it,  is  no  acceptance, 
unless  accompanied  with  circumstances  which  may  induce  a  third 
person  to  take  the  bill  by  indorsement;  but  if  there  are  any  such  cir- 
cumstances it  may  amount  to  an  acceptance,"  etc.  In  Mason  v.  ffunt 
(Doug.  299),  Lord  Mansfield  used  language  from  which,  probably, 
the  phraseology  of  the  statute  was  taken;  but  it  is  manifest  he 
intended  to  do  no  more  than  repeat  the  principle  he  had  before 
stated  in  Fierson  v.  Dunlop.  In  Clarke  v.  Cock  (4  East,  57),  this 
very  objection  was  taken  by  Gibbs,  (p.  67),  namely,  that  the  letter, 
itself,  ought  to  have  been  shown,  and  not  merely  the  purport  of  it 
given;  but  it  was  disregarded  by  all  the  judges.  The  communica- 
tion of  the  fact  of  the  promise,  was  deemed  the  material  circum- 
stance. 

Now  it  must  be  conceded  in  this  case,  that  the  promise  to  accept 
is  in  writmg,  and,  in  my  judgment,  it  is  an  unqualified  promise. 
"  If  you  want  more  funds,  you  can  make  draft  on  me,  etc.,  to  the 
amount  of  $10,000."  Who  was  to  determine  whether  more  funds 
were  wanted  ?  Undoubtedly,  Beach  &  Hudson.  The  question  was 
referred  to  their  sole  discretion;  and  when  decided  and  the  drafts 
drawn,  the  obligation  to  accept  became  imperative.  As  the  discre- 
tion to  draw  was  thus  left  solely  with  them,  the  terms  of  the  letter 
are  equivalent  to  an  absolute  promise  to  accept  whenever  they  drew 
upon  him  in  the  manner  specified.  It  is  not  for  him  to  set  up  an  abuse 
of  this  discretion  to  avoid  the  obligation,  unless  it  be  brought  home 
to  the  plaintiffs,  of  which  there  is  no  pretence. 

Did  the  plaintiffs  receive  the  bills  upon  the  faith  of  the  defendant's 
promise  to  accept  them,  and  for  a  valuable  consideration?  It  must 
be  conceded,  that  most,  if  not  all  the  money  now  relied  on  as  the 
consideration  for  these  bills,  was  actually  received  by  the  agents, 
and  therefore  paid  to  them  by  the  bank,  before  the  written  authority 
to  draw,  and  promise  to  accept  was  given:  and  hence,  it  cannot  be 
said,  strictly  speaking,  that  it  was  advanced  upon  the  faith  of  this 
promise.  So  much  must  be  admitted.  But  as  we  have  already 
shown,  the  agents  possessed  authority  to  raise  funds  for  the  pur- 
chase of  the  wheat  upon  the  defendant's  paper,  and  in  this  case,  no 
doubt  could  be  entertained  of  his  liability  as  drawer,  if  he  had  been 
so  charged.  It  is  true,  that  regularly,  the  drafts  should  have  been 
drawn  in  the  name  of  the  principal,  but  Hudson's  practice  was  uni- 
formly otherwise,  and  was  sanctioned  by  the  defendant.  He  cannot 
be  permitted  to  avail  himself  of  that  oI)jection.      It  may  then  be  con- 


6l6  ACCEPTANCE   OF    BILLS.  [ART.  XI. 

fidently  said,  that  the  money  when  taken  from  the  packages  by  Hud- 
son operated  as  a  loan  to,  or  charge  upon,  Ely,  the  principal;  that 
the  debt  was  his,  and  if  no  drafts  had  been  given  he  would  have 
been  holden  to  discharge  it,  upon  the  plainest  law  applicable  to  the 
relation  of  principal  and  agent.  Now,  assuming  the  advance  to  have 
stood  on  this  footing  on  the  i8th  January,  when  the  written  authority 
to  draw  the  bill  was  given,  and  the  drafts  in  question  were  subse- 
quently drawn;  is  not  the  taking  of  them  by  the  plaintiffs  for  this 
debt,  a  taking  upon  the  faith  of  the  promise  to  accept  and  for  a 
valuable  consideration  ?  A  man's  own  debt  or  account  owing  by 
him  is  certainly  a  good  consideration  for  the  draft  of  his  authorized 
agent,  and  there  can  be  no  doubt  of  the  fact  that  the  paper  was 
received  on  the  credit  of  the  engagement  of  Ely  to  accept,  or  which 
is  the  same  thing,  in  judgment  of  law,  upon  the  authority  to  draw 
upon  him.  Here,  then,  are  the  three  ingredients  required  by  the 
statute:  i.  A  written  promise  to  accept;  2.  Taking  the  drafts  upon 
the  faith  of  it;  and  3.  A  valuable  consideration,  to  wit,  the  debt 
existing  against  the  defendant,  created  by  an  agent  with  full 
authority. 

It  is  to  be  regretted  the  attorney  had  not  inserted  the  common 
counts  in  his  declaration,  and  then  the  question  upon  the  statute 
might  have  been  avoided;  the  defendant  would  have  been  charged 
as  drawer  of  the  drafts  in  question. 

Prudence  would,  perhaps,  require  that  the  pleadings  should  be 
amended  in  this  particular. 

Motion  to  set  aside  the  report  of  referees  granted;  costs  to  abide 
the  event.' 

'  See  also  Exchange  Bank  v.  Hubbard,  62  Fed.  Rep.  112. 

Virtual  Acceptances.  —  An  unconditional  written  promise  to  accept  a  bill  to 
be  thereafter  drawn  is  binding  in  favor  of  holders  in  due  course  who  take  the 
bill  upon  the  faith  of  the  promise.  Coolidge  v.  Payson,  2  Wheat.  (U.  S.)  66; 
I  Daniel  on  Neg.  Inst.,  §§  551,  560;  4  Am.  &  Eng.  Encyc.  L.  (2nd  ed.),  pp.  233-245. 
But  the  promise  must  be  unconditional.  Mel-chants'  Bank  v.  Griswold,  72  N.  Y. 
472;  Gerniania  N.  B.  v.  Tanks,  loi  N.  Y.  442;  Bank  \.  Recktiagel,  109  N.  Y.  4S2. 
The  promise  must  be  in  writing.  Johnson  v.  Clark,  39  N.  Y.  216  (telegraphic  prom- 
ise sufficient);  I  Daniel,  §  556.  The  promise  must  describe  the  bill  in  unequivo- 
cal terms.  Boyce  v.  Ediuards,  4  Peters  (U.  S.)  Ill;  Franklin  Bank  v.  Lynch,  52 
Md.  270  (cf.  Flora  First  X.  B.  v.  Clark,  61  Md.  400);  Ulster  Co.  Bank  v.  Mc Far- 
Ian,  5  Hill  (N.  Y.)  432;  3  Den.  553;  i  Daniel,  §  560,  561.  The  bill  must  follow 
the  terms  of  the  promise.  Lindlcy  v.  First  N.  B.,  76  Iowa,  629;  Brinkman  v. 
Hunter,  73  Mo.  172;  4  Am.  &  Eng.  Encyc.  L.  (2nd  ed.),  p.  243.  The  bill  must  be 
drawn  within  a  reasonable  time  after  the  giving  of  the  promise.  First  N.  B.  v. 
Bensley,  2  Fed.  R.  609;  i  Daniel,  §  560.  Cf.  Johnson  v.  Clark,  39  N.  Y.  216.  The 
bill  must  be  taken  by  the  holder  upon  the  faith  of  the  promise.  M' Evers  v. 
Mason,  10  Johns.  (X.  Y.)  207;  Exchange  Bank  v.  Rice,  98  Mass.  2SS.  —  Ed. 


^-  3]  BY   REFUSAL   TO    RETURN.  617 

3.  Acceptance  by  Refusal  to  Return  the  Bill. 
§  225  AIATTESON  v.  MOULTON.  [§  137] 

II  HcN  (N.  Y.),  26S.  —  1S77.' 

Action  against  defendant  as  acceptor.     Judgment  for  plaintiff. 

Talcott,  J. — This  is  a  motion  for  a  new  trial  on  a  verdict 
directed  by  the  court  at  the  Cattaraugus  Circuit.  Exceptions  sent 
to  the  General  Term  in  the  first  instance. 

The  action  was  upon  an  inland  bill  of  exchange,  drawn  by  one 
McDonald  on  the  defendant  for  $526.76.  The  bill  was  never  accepted 
by  the  defendant  in  writing,  as  required  by  the  statute,  which  pro- 
vides that  no  person  within  this  State  shall  be  charged  as  an  acceptor 
on  a  bill  of  exchange  unless  his  acceptance  shall  be  in  writing, 
signed  by  himself  or  his  lawful  agent,  (i  R.  S.,  2d  ed.,  757,  §  6); 
and  unless  he  is  made  liable  as  an  acceptor  under  the  subsequent 
eleventh  section,  he  is  not  liable  upon  the  bill.  The  said  section  11 
is  as  follows: 

"  Every  person  upon  whom  a  bill  of  exchange  is  drawn,  and  to 
whom  the  same  is  delivered  for  acceptance,  who  shall  destroy  such 
bill,  or  refuse  within  twenty-four  hours  after  such  delivery,  or  within 
such  other  period  as  the  holder  may  allow,  to  return  the  bill  accepted 
or  non-accepted  to  the  holder,  shall  be  deemed  to  have  accepted  the 
same." 

The  bill  was  sent  by  a  third  party  with  directions  to  leave  it  at  the 
office  of  the  defendant,  which  was  done,  and,  so  far  as  appears,  no 
demand  of  acceptance  was  ever  made.  The  defendant  did  not 
destroy  the  bill,  for  he  produced  it  on  the  trial.  The  defendant 
never  refused  to  return  the  bill;  in  fact,  he  was  not  directly  required 
to  return  it,  and  no  direct  demand  of  the  bill  was  ever  made  upon 
him.  Two  days  after  the  making  of  the  bill  and  the  delivery  of  it 
to  his  agent  at  his  office,  the  plaintiff  called  at  the  office  and  ascer- 
tained that  the  bill  had  been  left  there,  and  was  informed  by  the 
agent  that  they  were  hard  up  and  would  not  i)ay  that  day,  but 
received  no  promise  that  the  bill  should  be  paid  at  any  future  day. 
The  plaintiff  went  away  and  left  the  bill  unaccepted  at  the  office  of 
the  defendant.  Two  or  three  days  after  this,  the  plaintiff  met  the 
defendant  at  the  hotel,  in  the  same  place  in  which  the  office  of  the 
defendant,  before  spoken  of,  was  located,  and  had  a  conversation 
with  the  defendant  about  the  l)ill,  informing  the  defendant  that  he 
(the  plaintiff)  had    such    a  bill   and   that  it  was  at  defendant's  office. 

'  Affirmed  79  N.  Y.  627.  —  Eu. 


6l8  ACCEPTANXE    OF   BILLS.  [ART.  XL 

The   following   conversation,    as   testified  to  by  the  plaintiff,   then 
ensued  between  the  parties: 

"  I  wanted  to  know  whether  he  was  going  to  pay  it  or  not,  and  if 
not,  I  wanted  the  order;  and  he  (the  defendant)  said  he  could  not 
pay  it  then,  but  as  soon  as  he  liad  completed  five  miles  of  the  rail- 
road running  into  Jamestown  he  should  have  the  money.  I  asked 
him  how  long  that  would  be,  and  he  said  ten  days  or  two  weeks.  I 
told  him  it  was  considerable  of  an  amount,  and  I  wanted  to  know 
whether  I  should  get  my  pay  on  it  or  not.  He  said  I  would  get  my  pay 
on  it  inside  of  two  weeks.  I  told  him  I  wanted  my  pay  on  the  order, 
and  he  said  I  would  get  my  pay  on  the  order  as  soon  as  he  completed 
five  miles  of  the  railroad.  Buffalo  city  was  going  to  pay  him,  and 
that  he  would  get  done  inside  of  two  weeks."  This  conversation 
occurred  in  June,  and  it  does  not  appear  that  anything  else  took 
place  between  the  parties  until  the  sixth  day  of  October,  when  they 
again  met,  and  the  plaintiff  asked  the  defendant  about  pay  on  the 
bill,  and  the  defendant  stated  that  "  he  had  been  disappointed  about 
pay."  The  plaintiff  also  stated  that  the  defendant  never  returned 
the  bill  or  offered  to  return  it. 

We  do  not  think  that  the  evidence  established  a  refusal  to  return 
the  bill,  within  the  eleventh  section  of  the  statute  above  referred  to. 
The  refusal  mentioned  in  the  statute,  as  it  seems  to  us,  refers  to 
something  of  a  tortious  character,  implying  an  unauthorized  con- 
version of  the  bill  by  the  drawee.  In  this  case  it  is  obvious  that  the 
plaintiff  willingly  left  the  bill  in  the  possession  of  the  defendant,  and 
in  no  way  gave  the  defendant  to  understand  that  a  redelivery  of  the 
bill  was  rquired,  relying  probably  upon  the  expectation  that  it  would 
be  ultimately  paid.  The  attempt  to  charge  the  defendant  with  the 
payment  of  the  bill  upon  the  ground  of  a  promise  is,  as  it  appears  to 
us,  simply  an  attempt  to  charge  the  defendant  with  a  liability  on  the 
bill  upon  a  parol  acceptance.  If  an  action  can  be  maintamed  under 
such  circumstances,  the  provisions  of  section  6  of  the  statute  before 
referred  to  would  be  rendered  wholly  nugatory. 

Besides,  as  to  the  promise,  there  was  no  evidence  to  show  that  the 
five  miles  of  railroad,  on  the  completion  of  which  the  promise  to 
pay  the  bill  was  conditioned,  had  been  completed. 

The  defendant  moved  for  a  nonsuit  on  the  ground:  First.  That 
there  was  no  acceptance  of  the  bill  in  writing.  Second.  That  there 
was  no  demand  of  the  bill  before  suit  Third.  That  there  was  no 
refusal  to  deliver  the  bill.  Fourth.  That  the  plaintiff  had  failed  to 
make  out  a  cause  of  action.  The  court  held  that  the  defendant  was 
liable  because  he  was  indebted  to  McDonald,  the  drawer,  because 
he  had   received  and  retained,  and  declined  to  return  the  bill,  and 


I.  4.]  INCOMPLETE   OR   DISHONORED    BILL.  619 

had  promised  to  pay  it;  to  which  ruling  and  to  the  refusal  of  a  non- 
suit the  defendant  excepted.  We  think  the  nonsuit  should  have 
been  granted  for  the  reasons  stated  by  the  defendant. 

The  verdict  is  set  aside  and  a  new  trial  ordered,  costs  to  abide  the 
event.' 


4.  Acceptance  of  Incomplete  or  Dishonored  Bill. 
§  226  HOPPS  &  CO.  v.   SAVAGE.  [§  138] 

6g  M.\RYLAND,  513.  —  iSSS. 

Action  against  defendant  as  acceptor.  Defendant  accepted  the 
draft  before  the  drawer  (Waddy)  signed  it.  The  draft,  payable  "  to 
order  of  myself,"  was  then  indorsed  to  plaintiff  by  Waddy.  Plaintiff 
presented  it  to  defendant  who  refused  to  accept  or  pay  it  and  pointed 
out  that  Waddy  had  not  signed  it  as  drawer.  Plaintiff  then  pro- 
cured Waddy's  signature  as  drawer.     Judgment  for  plaintiff. 

Miller,  J.  [after  stating  the  facts]  delivered  the  opinion  of  the 
Court.  .  .  .  The  material  facts  are  undisputed.  Hopps  wrote 
the  draft  himself,  accepted  it,  and  then  gave  it  to  Waddy  for  the 
express  purpose  of  enabling  him  to  raise  money  upon  it.  It  is  true 
it  was  delivered  to  him  before  Waddy  had  signed  it  as  drawer,  but 
there  can  be  no  doubt  as  to  the  fact  that  Hopps  intended  Waddy 
should  sign  and  negotiate  it.  In  such  case  the  law  implies  an 
authority  from  Hopps  to  Waddy  to  sign  his  name  as  drawer.  Four 
days  after  its  date,  and  long  before  its  maturity,  Waddy  indorsed 
the  draft  to  Savage,  and  received  from  the  latter  its  full  face  value. 
That  Savage  thereby  became  a  bona  fide  holder  for  value  is  undenia- 
ble. Even  if  he  had  then  known  that,  as  between  Hopps  and  Waddy, 
it  was  without  consideration  and  merely  an  accommodation  bill,  his 
position  as  such  holder  would  not  have  been  affected  by  such  knowl- 
edge.     {Maitlaud  ••:.  Citizens'  Nat.  Bank  of  Baltc,  40  Md.  540.) 

It  is  also  true  that  Waddy's  signature  was  not  put  to  the  draft 
until  after  Savage  had  become  the  holder.  In  other  words,  the 
draft,  when  indorsed  to  Savage,  was  in  blank  in  respect  to  the 
drawer's  name,  but  this  blank  was  afterwards  filled  up  in  accordance 


'  See  also  Uolbrook  v.  Payne,  151  Mass.  383,  ante,  n.  605;  Overman  v.  Ifohokcn 
City  Bank,  31  N.  J.  L.  563;  Colorado  N.  B.  v.  Boettclu-r,  5  Colo.  185;  J,iiuc  v. 
Ward,  I  B.  &  Aid.  653. 

The  drawer  has  twenty-four  hours  in  which  to  decide  whether  to  accept  or 
not,  if  presentment  is  made  before  the  day  of  maturity.  Mon(i;omery  County 
Bank  v.  Albany  City  Bank,  8  Barb.  (N.  Y.)  396;   i  Daniel,  ^  492.  —  Eu. 


620  ACCEPTA^XE    OF    BILLS.  [ART.   XL 

with  the  intention  of  the  parties  when  the  bill  was  written  and 
accepted.  We  are  clearly  of  opinion  the  law  authorized  this  to  be 
done.  In  fact  the  authorities  go  to  the  extent  of  holding  that 
Savage  would  have  been  authorized  to  fill  the  blank  by  inserting  his 
own  name  as  drawer.  Such  was  the  decision  of  the  Common  Pleas 
Division  in  Harvey  v.  Cane  (34  Law  Times,  N.  S.  64) ;  and  in  Scard 
and  Wife  v.  Jackson,  reported  in  a  note  to  the  same  case,  it  was 
held  that  the  name  of  the  holder  could  be  thus  inserted  after  the 
maturity  of  the  bill.  (See,  also,  Schultz  v.  Astley,  2  Bing.  N.  C. 
544.)  In  the  case  before  us  the  suit  is  by  a  bona  fide  holder  for  value 
before  maturity,  against  the  acceptor,  and  the  drawer's  name  was 
signed  in  strict  accordance  with  the  intention  of  the  parties.  We 
hold  that  in  such  a  case  it  makes  no  difference  whether  the  blank 
was  filled  before  or  after  the  maturity  of  the  draft. 

From  these  views  it  follows  there  was  no  error  of  which  the  appel- 
lant is  entitled  to  complain  in  the  rulings  of  the  court  upon  the 
instructions,  and  the  judgment  must  be  affirmed. 

Judgment  affirmed. 


§  226  STOCKWELL  v.   BRAMBLE.  [§  138] 

3    L\DI.A.NA,   42S.  1S52. 

Action  against  defendant  as  acceptor  of  a  bill.  Judgment  for 
defendant. 

Plaintiff  offered  to  prove  that  defendant  stated  that  he  would 
accept  the  bill,  but  did  not  want  it  generally  known  that  he  was 
accepting  the  drawer's  bills,  and  would  therefore  write  "  protested  " 
across  the  face,  which  he  did  and  signed  his  name;  that  afterward 
on  the  same  day  defendant  again  promised  to  pay  the  bill.  This 
evidence  was  excluded. 

Blackford,  J.  [after  stating  the  facts].  We  think  that  the  parol 
evidence  offered  by  the  plaintiff  was  admissible,  on  the  ground  that 
it  showed  a  valid  acceptance  of  the  bill  by  the  defendant,  after  he 
had  written  on  it  the  word  "  Protested." 

Suppose  the  word  "  Protested,"  as  written  on  the  bill,  10  mean 
that  the  defendant  refused  to  accept  the  bill,  and  the  holder  so 
understood  that  word;  and  suppose,  also,  that  evidence  of  what  the 
defendant  said,  at  the  time  of  such  refusal,  was  objectionable  as  con- 
tradicting the  word  "  Protested,"  still  the  subsequent  parol  accept- 
ance would  be  good.  We  know  of  no  reason  why  the  drawee  of  a 
bill,  who  has  refused  to  accept  the  same,  may  not  afterwards  accept 
it.     It  frequently  happens  that  a  bill,  after  being  protested  for  non- 


II.  I.]  GENERAL   ACCEPTANCE,  62 1 

acceptance,  is  accepted  by  a  third  person  supra  protest.  The  fol- 
lowing case  is  cited  by  Mr.  Chitty:  A  foreign  bill  drawn  on  defend- 
ant was  protested  for  non-acceptance,  and  returned,  and  afterward 
defendant  told  the  plaintiff,  "  if  the  bill  comes  back  I  will  pay  it," 
and  this  was  held  a  good  acceptance.  (Chitty  on  Bills,  316,  note  /.) 
It  is  clear,  therefore,  that  the  fact  of  a  bill's  having  been  protested, 
does  not  prevent  its  being  afterwards  accepted  by  the  drawee. 

The  acceptance  is  not  objectionable  merely  because  it  was  by 
parol.  By  the  law  merchant,  a  bill,  whether  foreign  or  inland,  may 
be  accepted  by  parol  as  well  as  by  writing,  (Chitty  on  Bills,  316); 
and  that  is  the  law  here. 

Per  Curiam. — The  judgment  is  reversed  with  costs.  Cause 
remanded. 


II.  Kinds  of  Acceptances. 

I.   General  Acceptance. 

§  227   MEYER  &  CO.  V.  DECROIX,  VERLEY  Et  CIE.   [§  139] 

L.  R.,  1S91,  Appeal  Cases  (H.  L.),  520. 

Action  by  indorsees  against  acceptors,  upon  the  following  instru- 
ment:^ 

RouBAix,  Sept.  I2ih,  iSSg. 
No.  501.  £■]^%  4J-.  2d. 

On  Oct.  31st  after  date  pay  to order^  Mr.  L.  Delobbel  Flipo  seven  hun- 
dred and  seventy-eight  pounds  4^^.  id.     Value  received. 

L.  Delobbel  Flipo. 
To  Messrs.  H.  Meyer  &  Co.,  Limited, 

London,  Eng. 
[Across  the  face  was  turittcn  and  stampcd:'\ 
In  favor  of  Mr.  L.  Delobbel  Flipo  only. 

No.  28. 
Accepted  payable  at  Alliance  Bank,  London,  for  H.  Meyer  &  Co.,  Limited. 
B.  Manning,  Arthur  Manning,  Directors.     Arthur  ^L■^NNING,  Secretary. 

The  word  "  order  "  in  the  bill  was  struck  out,  but  when  or  by 
whom  did  not  appear. 

'"A  promise  to  accept,  even  after  a  protest  for  non-acceptance,  is  binding; 
and  a  promise  to  accept  made  after  the  bill  becomes  due  according  to  its  tenor, 
amounts  to  a  promise  to  pay  immediately."  Grant  v.  Shaw,  16  Mass.  341 
(1820).  —  Ed. 

'  In  fac-simile  in  59  L.  J.  Q.  B.  539.  —  En. 

•''This  word  was  struck  out  by  a  pen  mark.  By  the  provisions  of  the  Bills  of 
Exchange  Act  (^  8,  subsec.  4)  the  words  "  order  "  or  "  bearer  "  are  not  neces- 
sary to  render  a  bill  negotiable.  —  Eu. 


622  ACCEPTANCE    OF   BILLS.  [ART.    XL 

Plaintiffs,  bankers  at  Lille,  in  France,  discounted  the  bill  for 
Flipo.  They  did  not  understand  English  and  their  attention  was 
not  called  to  the  form  of  the  acceptance  until  after  the  dishonor 
of  the  bill  by  the  Alliance  Bank. 

The  Divisional  Court  (Cave  and  A.  L.  Smith,  JJ.)  held  the  accept- 
ance was  a  qualified  one,  rendering  the  bill  non-negotiable,  and  gave 
judgment  for  defendants.  The  Court  of  Appeal  (Lord  Esher,  M. 
R.,  Lindley  and  Bowen,  L.  JJ.)  reversed  that  decision  and  entered 
judgment  for  the  plaintiffs.'     Defendants  appeal. 

Lord  Herschell.  — My  Lords,  the  respondents  in  this  case  seek 
to  recover  from  the  appellants  the  amount  of  a  bill  of  exchange 
accepted  by  them.  The  defence  set  up  is  that  the  acceptance  was  a 
qualified  one,  and  restricted  the  right  to  require  payment  to  the 
payee  alone,  and  that  the  acceptors  are  therefore  under  no  obliga- 
tion to  the  respondents  who  took  by  indorsement  from  him. 

It  was  not  disputed  at  the  bar  that  the  acceptor  of  a  bill  of 
exchange  may  make  his  acceptance  a  qualified  one.  If  he  do  so,  the 
drawer  may,  of  course,  refuse  to  take  such  an  acceptance,  and  treat 
the  bill  as  dishonored:  but  if  he  takes  the  bill,  the  obligation  of  the 
acceptor  is  not  absolute,  but  subject  to  the  qualification  which  he 
has  introduced.  I  think,  further,  that  it  is  beyond  dispute  that  if  an 
acceptor  seeks  to  qualify  his  acceptance,  and  thus  to  modify  the 
obligations  which  an  acceptance  ordinardy  imposes,  he  must  do  so 
on  the  face  of  the  bill  in  clear  and  unequivocal  terms,  and  in  such  a 
manner  that  any  person  taking  the  bill,  if  he  acted  reasonably,  could 
not  fail  to  understand  that  it  was  accepted  subject  to  an  expressed 
qualification. 

About  these  propositions  I  do  not  think  there  can  be  any  differ- 
ence of  opinion;  the  difficulty  lies  in  applying  them  to  the  facts  of 
the  particular  case.  The  bill  in  question  was  drawn  in  France  by  a 
person  named  Delobbel  Flipo  upon  the  appellants,  and  forwarded  to 
London  for  their  acceptance.  The  bill  is  drawn  on  a  printed  form 
containing  the  word  "  order  "  immediately  preceding  the  name  of 
Delobbel  Flipo,  which  has  been  inserted  as  the  payee  of  the  bill. 
This  word  "  order  "  has  been  erased,  but  by  whom  does  not  appear, 
nor  do  I  think  it  material.  If,  as  suggested,  it  was  done  by  the 
acceptors,  they  were  not  justified  in  making  the  erasure,  and  in  any 
case  there  would  be  nothing  to  show  a  person  taking  the  bill  that 
the  word  had  not  been  struck  out  by  the  drawer  at  the  time  he 
inserted  the  name  of  the  payee.  I  do  not  think,  therefore,  that  the 
erasure  of  the  word  "  order  "  can  in  any  way  assist  the  contention 

'  See  =;q  L.  ].  Q.  B.  539;  L-  R-  25  Q-  B.  D.  343.  —  Ed. 


II.   I-]  GENERAL    ACCEPTANCE.  623 

that  the  acceptance  was  a  qualified  one.  That  must  be  determined 
by  a  consideration  of  the  effect  of  the  words  written  across  the  bill 
by  the  acceptors. 

For  the  purpose  of  accepting  the  bill  the  appellant  company 
impressed  upon  it  by  means  of  a  stamp  the  words  "  accepted  pay- 
able at  Alliance  Bank,  London,"  underneath  which  the  signatures 
of  two  directors  and  the  secretary  were  written.  The  acceptors 
wrote  across  the  bill  above  the  word  "  accepted  "  the  words  "  In 
favor  of  Mr.  L.  Delobbel  Flipo  only:  "  between  these  words  and  the 
word  "accepted"  was  written  "  No.  28."  In  considering  whether 
the  effect  of  the  words  "  In  favor  of  Mr.  L.  Delobbel  Flipo  only  "  was 
to  make  the  acceptance  a  qualified  one  in  the  manner  suggested, 
regard  must  be  had  both  to  the  words  used  and  to  the  situation  in 
which  they  are  placed.  It  may  be  that  if  the  same  words  had  been 
found  in  the  body  of  the  acceptance  following  the  word  "  accepted," 
they  would  have  amounted  to  the  qualification  contended  for.  The 
presence  of  any  words  in  the  body  of  the  acceptance  would  of  itself 
suggest  the  idea  that  some  qualification  of  it  was  intended;  but 
where  the  words  are  not  inserted  in  the  body  of  the  acceptance,  I  do 
not  think  the  same  impression  is  likely  to  be  produced,  though  the 
words  may,  of  course,  be  so  clearly  intended  to  qualify  the  accept- 
ance and  so  incapable  of  any  other  reasonable  construction  that  they 
would  be  as  effectual  for  the  purpose.  But  in  the  present  case  the 
words  written  above  the  acceptance  are  not  "  Payable  to  Delobbel 
Flipo  only,"  which  is  the  meaning  sought  to  be  attached  to  them, 
but  "  In  favor  of  Delobbel  Flipo  only,"  which  do  not  seem  to  me 
necessarily  to  bear  the  same  meaning.  The  words  "  in  favor  of," 
when  used  in  relation  to  a  bill  of  exchange,  do  not  ordinarily  mean 
that  it  is  payable  only  to  the  person  in  whose  favor  it  is  said  to  be 
drawn;  the  words  are  equally  applied  when  the  bill  is  made  payable 
to  his  order.  The  words  "  In  favor  of,"  therefore,  are  properly 
paraphrased  by  "  payable  to,  or  to  the  order  of ;  "  but  then  it  is  said 
that  the  insertion  of  the  word  "only"  after  Flipo's  name  would 
show  that  this  could  not  be  the  meaning  intended.  It  must  be 
remembered  however  that  between  these  words  and  the  acceptance 
"  No.  28  "  was  inserted,  which  separates  the  words  which  it  is  sug- 
gested qualify  the  acceptance  from  the  acceptance  itself. 

Under  these  circumstances  I  do  not  think  that  it  is  impossible  that 
a  person  taking  the  acceptance  by  way  of  indorsement  might  suppose 
that  these  words  "  In  favor  of  Delobbel  Flipo  only  "  were,  like  the 
"  No.  28,"  a  mere  memorandum  inserted  by  a  party  to  the  bill,  and 
not  intended  to  affect  the  acceptance.  It  might  be  supposed  to 
indicate  that  it  was  the  28th  bill,  or  No.  28  of  the  bills  accepted  "  in 


624  ACCEPTANCE    OF   BILLS.  [ART.   XI, 

favor  of  Delobbel  Flipo  only,"  as  distinguished  from  bills  accepted 
in  favor  of  Flipo  and  some  other  persons.  I  do  not  say  that  this 
would  be  the  interpretation  given  to  it  by  a  person  who  carefully 
and  critically  considered  it.  But  that  is  not  the  question.  It  is 
impossible,  as  I  have  said,  to  dissociate  the  words  used  from  the 
position  and  collocation  in  which  they  are  found,  and  if  these  be 
such  as  to  suggest  that  the  words  are  a  mere  memorandum,  a  person 
taking  the  bill,  even  if  he  exercised  the  ordinary  care  to  be  expected 
in  such  transactions,  would  not  be  likely  to  examine  or  weigh  them 
with  the  same  care  as  if  they  were  found  in  the  body  of  the  accept- 
ance. 

In  my  opinon  the  qualification  was  not  made  in  clear  and  unequiv- 
ocal terms,  and  in  such  a  manner  that  any  person  taking  the  bill, 
if  he  acted  reasonably,  could  not  fail  to  understand  that  it  was 
accepted  subject  to  that  qualification.  I  think,  therefore,  the  judg- 
ment ought  to  be  affirmed.' 

Lord  Br.\mwell.  —  My  Lords,  I  consider  what  was  written  and 
printed  by  the  defendants  on  the  face  of  the  bill  as  one  —  one  thing 
only  —  an  acceptance  and  no  more,  not  an  acceptance  and  some- 
thing else.  That  being  so,  I  am  unable  to  see  any  difference  between 
"  In  favor  of  Flipo  only,  accepted  payable,"  etc.,  and  "  Accepted 
in  favor  of  Flipo  only,  payable,"  etc.  I  do  not  know  where  the 
bodv  of  the  acceptance  begins,  unless  at  the  beginning  of  what  is 
written.  It  is  said  that  "  In  favor  of  Flipo  only  "  does  not  neces- 
sarily mean  the  same  as  "  accepted  in  favor  of  Flipo  only."  I  think 
it  does;  but  if  not  necessarily,  what  does  it  naturally  mean? 
Especially  when  it  is  remembered  that  the  word  "order"  was 
erased.  That  was  no  doubt  unauthorized,  if  done  by  the  drawees, 
but  it  clearly  shows  the  intention  of  the  drawees  if  done  by  them,  and 
the  knowledge  by  the  drawer  of  that  intention  if  done  by  him.  The 
striking  out  of  "  order  "  was  not  a  memorandum  for  the  use  of  the 
drawees.  I  cannot  find  that  any  other  cause  for  what  was  done  can 
be  suggested. 

As  to  the  thing  oemg  clear  and  unequivocal,  I  begin  to  doubt  if 
there  is  such  a  thing,  but  it  is  enough  if  words  are  intelligible.  Can 
there  be  a  doubt  that  this  bill  might  have  been  protested  for  non- 
acceptance  according  to  its  tenor  ?  I  suppose  from  the  form  of  the 
acceptance  that  the  appellants  thought  they  had,  or  might  have, 
some  cross-claim  against  Flipo.  Flipo,  probably,  was  glad  to  get 
anything  from  them,  and  so  put  up  with  the  acceptance,  and  perhaps 


'  Opinions  for  affirmance  were  also  delivered   by  Lord   Halsbury,  L.  C,  and 
Lord  Watson.  —  Ed. 


II-  I-]  GENERAL   ACCEPTANCE.  625 

indorsed   it  in  satisfaction  of  a  bad  debt  to  those  glad  to  get  any- 
thing from  him.' 

Order  appealed  from  affirmed,  and  appeal  dismissed  with  costs. 


§228  TROY  CITY  BANK  r.   LAUMAN.  [§140] 

19  New  York,  477.  —  1859. 

Action  against  indorsers  of  bills  addressed  to  the  payee  at  New 
York,  and  accepted  by  the  payee  "  payable  at  Continental  Bank, 
New  York."  Presentment  at  the  Continental  Bank;  payment 
refused;  due  notice.     Judgment  for  plaintiff. 

S.  B.  Strong,  J.,  [after  disposing  of  other  questions].  The  two 
drafts  were  respectively  addressed  to  the  drawee  in  New  York,  and 
were  accepted  by  him,  payable  at  the  Continental  Bank  in  that  city, 
where  the  demand  of  payment  was  made.  The  defendants'  counsel 
contended  on  the  trial  that  the  drafts  were  not  duly  accepted  or 
demand  of  payment  properly  made,  and  they  cited  the  case  of  IVood- 
liwrth  V.  The  Bank  of  America  (19  Johns.  391),  to  show  that  such 
practices  were  irregular  and  did  not  attach  any  responsibility  to 
them.  In  that  case,  however,  the  note  was  in  fact  payable  in 
Albany,  and  there  was  a  marginal  memorandum,  signed  by  the 
maker,  that  it  was  payable  in  New  York.  That  memorandum  was 
made  after  the  note  had  been  indorsed  by  Judge  Woodworth,  and 
without  his  knowledge.  It  was  held,  and  perhaps  properly,  that  the 
memorandum  was  an  alteration  of  the  note,  and  discharged  the 
indorser.  The  alteration  consisted  in  making  it  payable  in  a  different 
city,  and  that  rendered  it  material.  It  is  not  of  course  an  alteration 
of  a  draft  to  accept  it  as  payable  at  a  designated  place  in  the  same 
city,  and  if  it  could  be  deemed  a  change  at  all,  it  is  not  made  by  the 
payee  or  indorsee,  nor  is  it  at  all  material. 

So,  too,  in  the  case  of  Walker  v.  Bank  of  the  State  of  New  York  (13 
Barb.  636),  the  draft  was  directed  to  the  drawee  in  New  York  and 
accepted  by  him,  payable  at  Clayville  Mills,  in  Oneida  county.  It 
was  properly  held  that  the  change  was  material  and  rentlered  the 
acceptance  void,  and  that  as  no  notice  of  such  acceptance  was  given 
to  the  indorsees,  they  were  discharged. 

If,  in  the  case  under  consideration,  the  drafts  had  been  made  pay- 
able at  a  particular  store,  counting  house,  or  office  in  New  York,  it 
would  have  been  a  change,  although  I  do  not  think  that  it  would 
even  then  have  been  a  material  one,  to  have  accepted  it  as  payable 


'  Opinion  for  reversal  was  also  delivered  by  Lord  Morris.  —En. 

NEGOT.   INSTRUMENTS  —  40. 


626  ACCEPTANCE   OF   BILLS.  [ART.  XI. 

at  another  place  in  the  same  city.  No  possible  injury  can  result  to 
the  drawer  or  indorser  by  making  a  bill  of  exchange,  directed  to  the 
drawee  in  a  city  generally,  payable  at  some  particular  place  in  the 
same  city.  It  becomes  pro  hac  vice  the  place  of  business  of  such 
drawee.  The  cases  differ  as  to  whether  the  holder  may  not,  never- 
theless, present  the  bill  for  payment  at  the  ordinary  place  of  busi- 
ness, or  if  he  has  none,  the  residence  of  the  drawee;  '  but  I  have 
seen  none  which  decides  that  he  is  bound  to  do  so.  I  am  confident 
that  the  practice  pursued  in  this  instance  corresponds  with  com- 
mercial usage,  and  think  that  it  should  be  sustained. 
[The  Court  then  holds  the  notices  sufficient.] 

Judgment  affirmed.^ 


2.   Qualified  Acceptance. 
((?)   Cofidiiional  acceptance. 

§229  STEVENS  V.  ANDROSCOGGIN  WATER  [§141] 

POWER   CO. 

62  ALA.IXE,  49S.  —  1S74. 

Appleton,  C.  J.  —  This  is  an  action  of  assumpsit  against  the 
defendants,  as  acceptors  of  the  following  order,  drawn  on  them  by 
James  Hibbard: 

'  If  a  particular  place  is  specified  in  the  acceptance,  the  presentment  for  pay- 
ment must  be  made  at  that  place  or  the  drawer  and  indorsers  are  discharged. 
Brown  v.  Jones,  113  Ind.  46.  Contra:  K'iagara  District  Bank  v.  Fairman,  etc., 
Co.,  31  Barb.  (N.  Y.)  407,  where  it  is  held  that  if  the  bill  is  addressed  to  the 
drawee  in  Town  A.,  and  he  accepts  it  payable  in  Town  B.,  it  is  improper  to 
malie  presentment  in  B.,  but  it  should  be  presented  to  the  acceptor  in  A. 
Otherwise  if  he  accepts  it  payable  at  a  particular  place  in  Town  A.  —  Ed. 

-  "  Before  the  i  <S:  2  Geo.  4,  c.  78  (Sergeant  Onslow's  Act),  it  was  a  point 
much  disputed  whether,  if  a  bill  payable  generally  was  accepted  payable  at  a 
particular  place,  such  an  acceptance  was  a  qualified  one.  That  statute,  how- 
ever, has  now  settled  that  an  acceptance  payable  at  a  banker's  or  other  particu- 
lar place  is,  as  against  the  acceptor,  a  general  acceptance  unless  the  acceptor 
express  in  his  acceptance  that  the  bill  is  payable  there  only,  and  not  otherwise 
or  elsewhere."  Byles  on  Bills,  p.  197.  Ro7i'c  v.  Voinio;  (2  Brod.  &  Bing.  165), 
held  such  an  acceptance  to  be  qualified.  In  the  United  States  such  acceptances 
have  generally  been  held  to  be  unqualified.  Wallace  v.  McConnell,  13  Peters 
(U.  S.)  136;  I  Daniel,  §§  520,  641-643.  The  Neg.  Inst.  L.,  §  228  [140],  enacts 
substantially  the  provisions  of  Sergeant  Onslow's  Act,  now  found  in  Bills  of 
Exchange  Act,  §  19.  —  Ed. 


11.  2.]  QUALIFIED   ACCEPTANCE.  62/ 

Shelburne,  Feb.  25,  1S73. 
Androscoggin  Water  Power  Co., 

Edward  Plummer.  As^i-nt. 

Please   pay  to  James  A.  Stevens,  for  cutting  and  hauling  lumber,  the  sum  of 

one  hundred  and  thirty-four  dollars,  and  charge  the  same  to  my  account. 

James  HiiiiiARD. 

In  answer  to  a  letter  from  the  plaintiff,  the  defendants  on  March 
18,  1873,  wrote  the  following  letter  to  him: 

Lisbon  Falls,  Mk.,  March  iS,  1S73. 
Mr.  James  A.  Stevens: 

Dear  Sir:  Yours  of  the  thirteenth  inst.,  is  received.  We  shall  not  pay  any 
orders  of  Mr.  Hibbard  until  we  settle  with  him.  If  there  is  anything  over,  I 
will  keep  it  back  for  the  purpose. 

Yours  truly. 

E.  Phtmmer,  ./^v;//. 

The  order  of  February  25  was  retained  by  the  defendants  in  their 
possession.  On  March  25,  1873,  the  defendants  were  summoned  as 
trustees  of  James  Hibbard,  in  a  suit  in  which  one  Bean  was  plaintiff, 
returnable  at  the  September  term  of  the  Supreme  Judicial  Court  for 
the  county  of  Androscoggin,  and  for  the  sum  of  $356.70.  On  April 
28,  1873,  the  plaintiff's  attorneys  were  notified  that  this  action  would 
be  entered  at  the  September  term,  and  that  the  trustee  would  make 
a  full  statement  as  to  all  orders  drawn,  and  leave  the  questicMi  of 
liability  to  the  decision  of  the  court.  Prior,  however,  to  the 
September  term,  Hibbard  settled  the  suit  of  Bean,  and  directed  the 
defendants  to  pay  the  amount  due,  without  notifying  the  plaintiff  in 
this  suit.  At  the  time  of  this  settlement  there  were  due  Hibbard 
from  the  defendants,  four  hundred  and  four  dollars  and  forty-seven 
cents,  out  of  which  sum  they  paid  Bean  three  hundretl  and  sixty- 
nine  dollars  and  fifteen  cents,  and  the  balance  of  thirty-five  dollars 
and  thirty-two  cents  they  paid  Hibbard.  This  payment  was  on 
August  2,  1873. 

An  acceptance  may  be  absolute  or  conditional.  A  conditional 
acceptance  at  once  becomes  absolute  upon  the  performance  or  hap- 
pening of  the  condition. 

In  the  present  case  the  defendants'  promise  is  to  jiay  if  in  settle- 
ment "  there  is  anything  over."  When  the  acceptance  is  ronditiona!, 
the  holder  may  accept  or  refuse  the  offer.'  The  plaintiff  acceded 
to  the  proposition  of  the  defendants  —  permitted  the  order  to 
remain  with  them,  and  did  not  sue  out  a  trustee  writ,  by  wliiih  his 
whole  debt  would  have  been  secured.  There  was  a  settlement  and 
the  amount  due  exceeded  the  amount  of  Hibbard's  order.  The 
defendants  then  became  liable,  and  this  lial)ility,  conditional  in  the 


•  See  Neg.  Inst.  L.,  §  230  [142].  —  Ed. 


628  ACCEPTANCE    OF    BILLS.  [ART.  XL 

first  instance,  accrued  long  before  the  trustee  suit  of  Bean.  The 
payment  to  Bean  by  the  defendants  was  in  their  own  wrong,  and 
canot  defeat  the  prior  right  of  the  plaintiff. 

Defendants  defaulted.' 


(/>)  Partial   acceptance. 
§  229  PETIT  V.   BENSON.  [§  141] 

COMBERBACH,  452.  —  1697. 

A  BILL  was  drawn  upon  the  defendant,  who  accepts  it  by  indorse- 
ment in  this  manner:  "  I  do  accept  this  bill  to  be  paid,  half  in 
money  and  half  in  bills."  And  the  question  was,  whether  there 
could  be  a  qualification  of  an  acceptance;  for  it  was  alleged  that  his 
writing  upon  the  bill  was  sufficient  to  charge  him  with  the  whole 
sum.  But  'twas  proved  by  divers  merchants,  that  the  custom 
among  them  was  quite  otherwise,  and  that  there  might  be  a  qualifi- 
cation of  an  acceptance:  for  he  that  may  refuse  the  bill  totally,  may 
accept  it  in  part.  But  he  to  whom  the  bill  is  due  may  refuse  such 
acceptance,  and  protest  it  so  as  to  charge  the  first  drawer;  and 
tho'  there  be  an  acceptance,  yet  after  that  he  hath  the  same 
liberty  of  charging  the  first  drawer  as  he  before  had.' 


{c)  Local  acceptance. 
§  229  TROY  CITY  BANK  v.   LAUMAN.  [§  141 J 

19  New  York,  477.  —  1859. 
\Reported  herein  at  p.  625. J 

'  Any  condition  clearly  varying  the  tenor  of  the  bill  renders  the  acceptance 
conditional,  i  Daniel  on  Neg.  Inst.,  §  509-515;  4  Am.  &  Eng.  Encyc.  L.  (2nd  ed.), 
pp.  227-232.  The  conditional  acceptance  becomes  absolute  upon  the  happening 
of  the  condition.  Ibid.  An  acceptance  "  when  in  funds  "  is  conditional.  The 
bill  is  payable  when  the  acceptor  has  in  his  hands  funds  which  the  drawer  has 
a  present  right  to  demand  and  receive.      JVinteniittte  v.  Post,  24  N.  J.  L.  420; 

Wallace  v.  Douglas,  116  N.  Car.  659.  An  acceptance  of  a  sixty-day  bill  "  pay- 
able on  giving  up  bill  of  lading,  etc.,"  is  a  qualified  acceptance;  but  the 
acceptor  is  bound  even  though  the  bill  of  lading  is  not  tendered  until  after  the 
maturitv  of  the  bill.      Smith  v.  J'ertue,  30  L.  J.  C.  P.  56.  —  Ed. 

,'"  In  Molloy  and  the  other  books  there  is  a  whole  paragraph  about  the 
partial    acceptance    of    a    bill    of    exchange,   and    they    allow    it    to    be    good." 

W^gersloffe  v.  Kcene,  i  Strange,  214,  225.  —  Ed. 


II-  2-]  QUALIFIED   ACCEPTA^■CE.  629 

Halstead  v.  Skelton,  5  Q.  B.  86  (1843).  Tindal,  C.  J.  —  A  bill 
of  exchange  drawn  generally  on  a  party  may  be  accepted  in  three 
different  forms:  Either  generally,  or  payable  at  a  particular  banker's, 
or  payable  at  a  particular  banker's  and  not  elsewhere.  If  the  drawee 
accepts  generally,  he  undertakes  to  pay  the  bill  at  maturity  when 
presented  to  him  for  payment.  If  he  accepts  payable  at  a  banker's, 
he  undertakes  (since  the  statute)  to  pay  the  bill  at  maturity  when 
presented  for  payment  either  to  himself  or  at  the  banker's.  If  he 
accepts  payable  at  a  banker's  and  not  elsewere,  he  contracts  to  pay 
the  bill  at  maturity  provided  it  is  presented  at  the  banker's,  but  not 
otherwise. 

Here  the  bill  was  accepted  according  to  the  second  of  these  three 
forms;  /.  c,  payable  at  a  banker's,  without  any  restrictive  words; 
so  that  presentment  at  the  banker's  (though  if  made  it  would  have 
been  a  good  presentment)  was  yet  not,  as  against  the  acceptor, 
necessary 


(</)  Accfptancc  qualified  as  to  time. 

§  229  HATCHER  V.   STALWORTH.  [§  141] 

25  MississH'Pi,  376.  —  1853. 

Action  by  payee  against  acceptor  on  a  bill  {)ayable  at  sight. 
Plaintiff  presented  the  bill  to  defendant,  who  wrote  to  plaintiff  that 
he  (defendant)  would  pay  the  order,  but  could  not  say  when.  Judg- 
ment for  plaintiff. 

Mr.  Justice  Yerger  delivered  the  opinion  of  the  court. 

We  see  no  error  in  this  record.  Where  a  party,  on  whom  a  bill  is 
drawn  at  sight,  offers  or  promises  to  pay  at  a  future  day,  that 
amounts  to  an  acceptance,  if  acceded  to  by  the  holder.  (7  I'ick.  R. 
34;  Story  on  Bills,  §§  243,  244.) 

The  proof  in  this  case  shows  this  to  have  been  the  state  of  facts; 
and  we,  therefore,  must  affirm  the  judgment.'- 


'  If  the  bill  is  drawn  payable  on  a  given  date  it  may  be  accepted  payable  at  a 
different  date.  Russell  \'.  riiillips,  14  Q.  B.  891;  Green  v.  Kayvtoiut,  9  Neb.  295; 
Vanstrum  v.  Liljengren,  37  Minn.  191. 

If  a  bill  is  drawn  payable  two  months  after  sight,  and  is  presented  on  Si-|)i. 
14,  and  accepted  "  payable  Nov.  14,"  this  is  noi  a  f|ualificalion  whether  ihcrc 
be  days  of  grace  or  not.  So,  if  there  be  days  of  grace,  and  it  is  acceined 
"  payable  Nov.  17,"  this  is  also  treated  as  an  acceptance  according  to  the  tenor 
of  the  bill.  But  an  acceptance  payable  on  any  other  day  than  the  nominal  or 
peremptory  day  of  payment  is  a  qualified  acceptance.  Kenner  v.  Creditors, 
7  Martin  N.  S.  (La.)  540.  —  Eu. 


630  ACCEPTANCE    OF   BILLS.  [ART.  XI 

(f)  Acceptafice  by  one  or  mo?'e  drawees^  but  not  by  all. 

§  229      TOMBECKBEE  BANK  v.  DUMELL  &  LYMAN.   [§  141] 

5  Mason  (U.  S.  C.  C),  56.  —  1828. 

\_Reported  herein  at  p.  639.] 


3.   Effect  of  Qualified  Acceptance. 

{a)  Holder  may  refuse  qualified  acceptance. 

§  230  BOEHM  V.  GARCIAS.  [§  142] 

I  Campbell,  425,  note.  —  1808. 

Action  on  a  bill  drawn  on  Lisbon,  "  payable  in  effective,  and  not 
mvals  reals."  The  defendant  was  the  drawer  of  the  bill;  and  the 
question  was,  whether  it  had  been  dishonored  for  non-acceptance  ? 
The  drawees  offered  to  accept  it,  payable  in  vals  denaros,  another 
sort  of  currency,  which  was  refused.  The  defendant  now  proposed 
to  show,  that  vals  denaros  w^as  sufficient  to  answer  what  was  meant 
by  *  *  effective. 

Lord  Ellenborough.  —The  plaintiff  had  a  right  to  refuse  this 
acceptance.  The  drawee  of  a  bill  has  no  right  to  vary  the  acceptance 
from  the  terms  of  the  bill,  unless  they  be  unambiguously  and  une- 
quivocally the  same.  Therefore,  without  considering  whether  a  pay- 
ment in  denaros  might  not  have  satisfied  the  term  ''effective,''  an 
acceptance  to  pay  in  denaros  was  not  a  sufficient  acceptance  of  a  bill 
drawn  payable  in  "  effective.''  The  drawees  ought  to  have  accepted 
generally,  and  an  action  being  brought  against  them  on  the  general 
acceptance,  the  question  would  properly  have  arisen  as  to  the  mean- 
ing of  the  term. 

§  230  [142]  Wintermute  v.  Post,  24  N.  J.  L.  420,  423  (1854). 
Haines.  J.  — The  remaining  and  principal  point  arises  from  the  tenor 
of  the  acceptance,  "  when  in  funds."  This  is  a  conditional  accept- 
ance, and  the  plaintiff  was  not  bound  to  take  it.  If  lie  were  not 
satisfied  with  it,  he  might  have  protested  the  note  for  non-accept- 
ance, and  looked  to  the  drawer  for  its  payment.  But  having  taken 
it  without  objection,  he  must  submit  to  its  terms,  and  before  he  can 
enforce  it  against  the  acceptor  he  must  show  funds  of  the  drawer 
in  his  hands.' 


>  Accord:    Stevens  v.  Androscoggin  Water  Power  Co.,  62    Me.   4gS.  ante,  p.  626; 
Petit  V.  Bronson,  Comb.   452,   ante,   p.  628;   Hatcher  v.  Stalworth,   25    Miss.   376, 


^I-  3-]  QUALIFIED   ACCEPTANXE.  6:;  I 

(J?)  Qualified  acceptance  discharges  non-assenting  antecedent  parties. 

§  230  [142]   Walker  v.  Bank,  13  Barbour  (N.  Y.),  636  (1852).* 

Action  against  the  bank,  as  agent,  for  negligence  in  not  giving 
notice  of  dishonor  of  certain  bills.  The  bills  were  drawn  upon  E.  C. 
Hamilton  and  were  accepted  in  this  form:  "  Accepted,  payable  at 
the  Am.  Ex.  Bank:  Empire  Mills  by  E.  C.  Hamilton,  Treas." 
Hubbard,  J.  —  The  only  question  presented  is  whether  Hamilton, 
the  drawee,  can  be  charged  as  acceptor.  If  he  cannot,  the  defend- 
ant's liability  is  undisputed,  because  of  their  neglect  to  to  give  notice 
of  dishonor.  It  is  an  undoubted  rule  that  an  acceptance  dispensing 
with  notice,  must  be  absolute  according  to  the  tenor  of  the  bill;  not 
qualified,  or  varying  in  any  material  particular.  (Story  on  Bills 
§  240,  and  cases  cited  in  note  2;  Chitty  on  Bills,  329.)  The  obvious 
reason  is,  that  antecedent  parties,  if  made  liable,  are  entitled  to  full 
recourse  against  the  acceptor,  which  they  cannot  have  if  the  acceptance 
is  conditional.  It  is  also  well  settled  that  no  one  but  the  drawee 
named  can  become  an  acceptor,  except  for  honor  supra  protest. 
(Story  on  Bills,  §  121,  et  seq.')  [The  court  then  holds  that  no  one  was 
bound  by  this  acceptance.]  It  follows  therefore,  that  the  defendant 
should  have  treated  the  bills  as  dishonored,  and  given  notice  of  non- 
acceptance  to  the  indorsers,  who  by  the  omission  are  discharged 
from  liability.^ 

ante,  p.  629;  Green  v.  Raymond,  9  Neb.  295;  Gibstm  v.  Smith,  75  Ga.  33.  If  an 
agent,  as  a  bank,  receives  a  qualified  acceptance  without  authority,  the  agent 
becomes  liable  to  the  principal  for  any  loss  ensuing  therefrom.  Walker  v. 
Bank.  9  N.  Y.  5S2.  —  Ed. 

1  Affirmed  9  N.  Y.  582.  —  Ed. 

*  See  also  judges'  answers  to  the  3d  question  xviRowev.  Yottng,  2  Brod.  & 
Bing.  165;   I  Daniel,  §g  510-511.  —  Ed. 


ARTICLE    XII. 

Presentment  of  Bills  of  Exchange  for  Acceptance. 

I.  In  what  cases  presentment  for  acceptance  necessary. 

§  240  HART  V.   SMITH.  [§  143] 

15  Alabama,  807.  —  1849. 
[Reported  herein  at  p.  234.]  ' 


§  240  PLATO  V.   REYNOLDS.  [§  143] 

27  New  York.  5S6 — 1863. 
Action  against  drawers  of  a  bill.     Judgment  for  plaintiff. 

Wright,  J.  —  The  bill  which  was  drawn,  payable  one  day  after 
date,  was  presented  to  the  drawee  for  acceptance  on  the  day  it 
matured;  acceptance  was  refused,  and  it  was  protested  for  non- 
acceptance.  The  certificate  of  the  notary  states  that  on  the  same 
day  (i2th  September)  he  forwarded  written  notice,  by  mail,  to  the 
drawers  (the  defendants)  and  indorsers  (Miles  and  Bartlett),  inform- 
ing them  of  the  non-acceptance  thereof.  It  was  also  proved  that  on 
the  following  day  the  payees  (Miles  and  Bartlett)  received  the  origi- 
nal draft,  with  notices  of  protest  for  themselves  and  the  defendants, 
and  caused  such  notice  to  be  served  on  the  latter  that  day.  The 
drawee  also  informed  one  of  the  defendants,  on  the  12th  September, 
at  the  office  of  the  payees,  that  he  had  not  accepted  or  paid  the  draft. 
In  view  of  this  proof,  I  think  the  referee  did  not  err  in  refusing  to 
dismiss  the  complaint,  and  in  deciding  that  the  bill  was  duly  pre- 
sented and  protested,  and  that  due  notice  was  given  to  the  defend- 
ants to  charge  them  as  drawers. 

The  defendants  claim  that  the  draft  being  due  when  presented, 
and  demand  made  by  the  notary,  it  was  then  too  late  to  present  it 
for  acceptance;  and  presentment  for  acceptance  of  a  bill  which  is 
due,  is  not  sufficient  to  charge  the  drawers.     But  it  is  well  settled 


'  Under  the  Neg.  Inst  L.,  days  of  grace  are  abolished  §  145  [85].  and  such  a 
bill  would  not  under  the  Law  have  to  be  presented  for  acceptance. — Ed. 

[632] 


Q  WHEN   NECESSARY.  6^$ 

that  the  holder  of  a  bill,  payable  a  specified  length  of  time  after 
date,  or  on  a  day  certain,  need  not,  for  the  purpose  of  charging  the 
drawers  and  indorsers,  present  it  for  acceptance  until  it  becomes 
due  and  payable.  It  may  be  presented  before  or  at  the  time  of  its 
maturity.  (Edwards  on  Bills,  3S7 ;  Story  on  Bills,  §  231;  J//t'ft  v. 
Suvdain,   20  Wend.  321;  s.  c,  17  Id.  368.)     . 

All  the  judges,  except  Marvin,  J.,  agreed  that  a  refusal  to  accept 
on  the  day  payment  is  due  is  equivalent  to  a  refusal  to  [lav,  and 
renders  a  demand  of  payment  unnecessary.'  On  the  question  of 
evidence,  all  the  judges  concurred. 

Judgment  reversed,^  and  new  trial  ordered. 


§  241  ROBINSON  V.   AMES.  [§  144] 

20  Johnson  (N.  Y.)  146.  — 1822. 

This  was  an  action  of  assumpsit,  on  a  bill  of  exchange  drawn  by 
the  defendants,  merchants  in  Augusta,  in  the  State  of  Georgia,  on 
the  6th  of  March,  1819,  upon  Townsend  and  White,  merchants,  in 
the  city  of  New  York,  for  five  hundred  dollars,  payable  sixty  days 
after  sight,  to  Starr  and  Ross,  or  order,  by  whom  it  was  indorsed  to 
the  plaintiff.  The  cause  was  tried  at  the  New  York  sittings,  in 
June,  182 1,  before  the  chief  justice.  Tlie  bill  was  presented  for 
acceptance  on  the  20th  of  May,  1819,  and  notice  of  non-acceptance 
sent,  by  mail,  on  the  next  day,  to  the  drawers,  by  a  notary,  directed 
to  them  at  Augusta,  in  Georgia.  On  the  22d  of  July,  1S19,  the 
same  notary  presented  the  bill  to  the  drawers  for  payment,  which 
they  refused,  alleging  the  want  of  funds.  Notice  of  non-payment 
was  sent  through  the  post-office,  two  or  three  days  afterwards, 
addressed  to  the  defendants,  at  Savannah,  in  Georgia. 

Townsend,  one  of  the  dra\vees,  who  was  a  witness  for  the  plaintiff, 
testified,  that  on  the  20th  of  May,  1819,  the  drawees  had  no  funds  in 
their  hands  belonging  to  the  defendants,  and  had  then  accepted  drafts 
to  the  amount  of  three  or  four  thousand  dollars  more  than  tiiey  had 
funds  of  the  defendants,  and  that  this  was  the  last  bill  drawn  by 
them.  That  the  want  of  funds  proceeded  from  a  fall  in  the  price  of 
cotton  shipped  by  the  defendants  to  T.  and  W. ;  that  by  an  agree- 
ment between  them,  the  defendants  were  authorized  to  make  pur- 
chases of  cotton,  on  the  joint  account  of  themselves  and  T.  and  W., 
and  to   draw   on   T.  and.  W  for  the  amount.     That,  on  the  26th  of 


'Accord     Philpottv.  Bryant,  3  Car.  it    F.  244;    Wushini^ton  Hank  v.   Triplrft ,  I 
Pet.  (M.   S.)  25.— El). 

^  On  a  question  of  admission  of  evidence. — En. 


634  PRESENTMENT    FOR   ACCEPTANCE.  [ART.  XII. 

April,  1819,  T.  and  W.  stopped  payment.  That  after  the  6th  of 
March,  and  before  the  failure  of  T.  and  W.,  they  had  received  a  con- 
siderable amount  of  cotton  from  the  defendants,  but  had  accepted 
the  bills  of  the  defendants  to  a  larger  amount  than  the  value  of  the 
cotton  so  shipped,  and  the  difference  was  owing  to  a  loss  on  the 
cotton  shipped;  that,  if  the  defendants  were  to  pay  all  the  bills,  T. 
and  W.  would  owe  them  five  or  six  thousand  dollars;  but  if  T.  and 
W.  were  to  take  up  all  the  bills,  the  drawees  would  owe  them  three 
or  four  thousand  dollars. 

It  was  proved,  that  the  mail  which  left  Augusta  about  the  loth 
of  March,  was  lost;  and  that  the  mail  goes  from  that  place  to  New 
York,  in  ten  days,  and  leaves  the  former  place  three  times  a  week. 
That  where  bills  are  remitted  by  merchants,  it  is  the  usual  course  to 
send  the  bill  by  one  mail,  and  to  advise  by  the  next. 

A  verdict  was  taken  for  the  plaintiff,  for  five  hundred  and  seventy- 
two  dollars,  subject  to  the  opinion  of  the  court  on  a  case,  as  above 
stated. 

Spencer,  Ch.  J.,  delivered  the  opinion  of  the  court. 
The  questions  in  this  Case  are:     (i)  Whether  the  bill  was  trans- 
mitted in  due  time;  and  (2)  Whether  the  want  of  funds  in  the  hands 
of  the  drawees,  will  excuse  the  delay  in  presenting  the  bill,  or  the 
irregularity  in  the  notice  of  the  non-payment  of  it. 

I.  I  am  entirely  satisfied  that  there  is  no  foundation  for  saying 
the  defendants  are  precluded  from  setting  up  laches,  because  they  had 
no  right  to  draw  the  bill.  The  case  of  Bickerdike  v.  Bollmar  (i 
Term.  Rep.  405),  is  considered  the  first  case  deciding  that  notice  to 
the  drawer  of  the  dishonor  of  the  bill  was  unnecessary;  and  in  that 
case  the  drawer  had  no  funds,  and  knew  he  had  none,  in  the  hands 
of  the  drawee.  The  drawing  the  bill  was  considered  a  fraud,  and  it 
was  held  that  he  was  not  entitled  to  notice,  and  cou.d  not  be  injured 
by  the  want  of  it.  It  has,  however,  since  that  case,  repeatedly  been 
decided,  that  where  there  are  any  funds  in  the  hands  of  the  drawee, 
so  that  the  drawer  has  a  right  to  expect  the  bill  will  be  paid,  or 
where  there  are  not  any  funds,  yet  if  the  bill  was  drawn  under  such 
circumstances  as  induced  the  drawer  to  entertain  a  reasonable 
expectation  that  the  bill  would  be  accepted  and  paid,  the  person  so 
drawing  it  is  entitled  to  notice;  and,  a  fortiori,  he  is  entitled  to  have 
the  bill  duly  presented.  The  rule  is  correctly  laid  down  in  Claridge 
V.  Dalton  (4  Maule  &  Selw.  229),  by  Lord  Ellenborough.  The 
principle  which  has  been  stated  is  very  ably  supported  by  Chief 
Justice  Marshall,  in  French  v.  The  Bank  of  Columbia  (4  Cranch's 
Rep.  153),  where  the  principal  authorities  are  reviewed.  There  is 
nothing  more  important,  than  that,  in  questions  of  a  general  mercan- 


I.]  WHEN    NECESSARY.  635 

tile  nature,  there  should  be  a  uniformity  of  decision;  and,  although 
the  justice  and  equity  of  this  rule  may  not,  in  some  cases,  be  per- 
ceived, \vhere  the  payee  has  purchased  a  bill,  and  it  is  drawn  in  good 
faith,  and  no  conceivable  loss  has  happened  by  the  want  of  notice; 
yet,  as  there  may  be  cases  where,  though  there  were  no  funds  in 
the  hands  of  the  drawee,  the  drawer  may  be  injured  by  the  want  of 
notice,  it  is  better  that  the  rule  on  the  subject  should  be  general  and 
uniform  throughout  the  mercantile  world.' 

Jn  the  case  of  Miller  v.  Hacklcy  (5  Johns.  Rep.  375);  WelJon  and 
Funiiss  V.  Buck  and  another  (4  Johns.  Rep.  144);  and  Mason  and 
Smede  v.  Franklin  (3  Johns.  Rep.  202),  it  was  decided  that  if  a  bill 
was  presented  for  acceptance,  and  the  drawee  refused  to  accept  it, 
and  notice  thereof  was  duly  given,  a  demand  of  payment,  and  notice 
of  a  refusal  to  pay,  w-as  unnecessary,  because  the  drawer  was  fixed 
already.^ 

2.  The  only  remaining  question,  then,  is,  whether  there  was 
laches  in  presenting  the  bill  for  acceptance;  for  there  is  no  doubt 
that  regular  notice  was  given  of  the  refusal  to  accept  the  bill,  the 
day  subsequent  to  the  demand.  I  do  not  find,  that  where  a  bill  of 
exchange  has  been  drawn  payable  at  sight,  or  any  specified  number 
of  days  after  sight,  that  there  is  any  definite  or  fixed  rule  when  the  bill 
shall  be  presented  for  acceptance,  other  than  this,  that  due  diligence 
must  be  used.  And  it  is  certain,  that  with  respect  to  such  bills,  and 
particularly  where  they  are  negotiated  by  the  payee,  there  is  much 
more  latitude,  as  to  the  time  of  presentment,  than  where  the  bill 
has  a  fixed  period  of  payment.  In  the  case  of  Muilman  v.  D' Eg  11  i no 
(2  H.  Bl.  Rep.  565),  which  is  a  very  leadmg  case  on  this  subject,  the 
judges  felt  the  difficulty  of  saying  at  what  time  such  a  bill  should  be 
presented  for  payment.  Ch.  J.  Eyre  observed,  that  the  courts  had 
been  very  cautious  in  fixing  any  time  for  an  inland  bill,  payable  at 
a  certain  period  after  sight,  to  be  presented  for  acceptance.  He 
said,  that  if,  instead  of  drawing  their  foreign  bills  payable  as  usances, 
in  the  old  w^ay,  merchants  chose,  for  their  own  convenience,  to  draw 
them  in  this  manner,  and  to  make  the  time  commence  when  the 
holder  pleases,  he  did  not  see  how  the  courts  could  lay  down  any 
precise  rule  on  the  subject.  But  he  thought  the  holder  was  bound 
to  present  the  bill  in  a  reasonable  time,  in  order  that  the  period 
might  commence  from  which  the  payment  was  to  take  place;  and 
that  what  was  reasonable  time  must  depend  on  the  particular  cir- 
cumstances  of   the  case.     Buller,  J.,  said,   that  he  thought  a  rule 


>See  Neg.  Inst.  Law,  ^  185  [114].  and  §  245  [148].  — Ed. 
'See  §  248  [151].  — Ed. 


6t,6  presentment    for   acceptance.  [art.  XII. 

might,  thus  far,  be  laid  down  as  to  laches,  with  regard  to  bills  pay- 
able at  sight,  or  a  certain  time  after  sight,  namely,  that  thty  ought 
to  be  put  in  circulation.  If  they  are  circulated,  he  said,  the  parties 
are  known  to  the  world,  and  their  credit  is  looked  to;  and  if  a  bill, 
drawn  at  three  days  sight,  was  kept  out  in  that  way  for  a  year,  he 
could  not  say  there  would  be  laches;  but  further  than  that,  no  rule 
could  be  laid  down.  Heath,  J.,  observed  that  no  rule  could  be  laid 
down  as  to  the  time  for  presenting  bills,  payable  at  sight,  or  a  given 
tmie  after;  that  in  the  French  ordinance  of  1673,  (Postlethwaite's 
Diet.  tit.  Bills  of  Exchange),  it  is  said,  that  a  bill,  payable  at  sight, 
or  at  will,  is  the  same  thing,  and  that  this  agreed  with  Marius. 

Now,  here,  the  bill  was  put  in  circulation  by  Ross  and  Starr;  and, 
although  it  is  probable,  that  the  first  of  exchange  was  lost,  by  the 
loss  of  the  mail,  we  are  not  authorized  to  consider  that  as  a  fact  in 
the  case;  but  I  cannot  say,  that  upon  such  a  bill  there  has  been 
laches.  We  perceive  how  extremely  cautious  the  judges  were,  in  the 
case  cited,  in  laying  down  any  rule.  The  evident  inclination  of  their 
minds  was,  that  when  the  payee  put  the  bill  in  circulation,  the  sub- 
sequent holder  was  not  bound  to  any  strict  presentment.  The 
drawers  of  the  bill  evidently  did  not  mean  to  limit  the  time  of  pre- 
sentment, by  making  the  bill  payable  at  sixty  days  after  sight.  They 
meant  to  give  a  latitude,  as  to  time,  to  the  holder;  and  my  conclu- 
sion is,  that  there  is  not  such  laches  as  will  discharge  the  drawers. 

Judgment  for  the  plaintiff.' 


'  Accord:  Wallace  v.  Agry,  4  Mason,  (U.  S.  C.  C.)  336;  s.  c,  5  Mason,  118,  in 
which  a  "  sixty  days  after  sight "  bill  drawn  June  iS  at  Havana,  Cuba,  on  W.  in 
London,  and  there  presented  Oct.  31,  having  been  locked  up  in  the  holder's 
hands  in  Boston,  from  July  6  to  Sept.  29,  was,  on  the  second  trial,  found  by  the 
jury  to  have  been  presented  within  a  reasonable  time;  Aymar  v.  Beers,  7  Cowen, 
(N.  Y.)  705,  in  which  case  a  "  three  days  after  sight"  bill  drawn  Dec.  12  in  New 
York,  presented  Jan.  10  in  Richmond,  Va.,  having  been  in  the  payee's  hands 
during  that  time,  was  held  by  the  court  to  have  been  presented  within  a  reason- 
able time,  under  the  circumstances  of  the  case;  Bolton  v.  Harrod,  9  Mart.  (La.) 
326;    Gowan  v.  Jackson,  20  Johns.  (N.  Y.)  176;   Montelins  v.  Charles,  76  111.  305. 

In  the  following  cases  the  delay  vvas  deemed  to  be  unreasonable:  Mullick  v. 
Radakissen,  9  Moore  P.  C.  66;  Fernandez  v.  Lewis,  I  McCord,  (S.  C.)  322;  Du- 
moiif  V.  Pope.  7  Blackf.  (Ind.)  367;  Phcenix  his.  Co.  v.  Allen,  11  Mich.  501;  Cham- 
bers V.  /////,  26  Tex.  472. 

Whether  what  is  a  reasonable  time  is  a  question  for  the  jury  or  for  the  court 
has  occasioned  some  conflict.  The  question  was  left  to  the  jury  in  Wallace  v. 
Agry,  stipra;  it  was  decided  by  the  court  in  Aymar  v.  Beers,  supra;  it  was  held 
to  be  "  a  mixed  question  of  law  and  fact  "  in  Prescott  Bank  v.  Caver ly,  7  Gray, 
(Mass.)  217.     See  i  Daniel,  §  466;  note,  17  Am.  Dec.  544-549.  —  Ed. 


II.]  WHEN   SUFFICIENT.  637 

II.  What  constitutes  sufficient  presentment. 

§  242  SHARPE  r.   DREW.  [§  145] 

9  Indiana,  2S1.  —  1S57. 

Stuart,  J.  —  Suit  on  a  bill  of  exchange  by  Drew,  indorsee, 
against  Sharpe,  the  indorser.  The  action  was  instituted  before  the 
mayor  of  the  city  of  Evansville,  where  the  plaintiff  had  judgment 
for  the  bill  and  interest.  Sharpe  appealed  to  the  Circuit  Court, 
where  it  was  tried  with  the  like  result.  Sharpe  excepted  to  the 
rulings  of  that  court,  and  now  appeals  to  this. 

Two  points  are  made  and  argued —  i.  The  evidence  of  present- 
ment to  the  drawee  for  acceptance.  2.  The  evidence  of  notice  of 
protest  to  Sharpe. 

I.  It  is  correctly  contended  that  the  presentment  for  acceptance 
should  be  to  the  drawee  himself,  if  he  can  be  found.  (Chitty  on 
Bills,  27S.)  If  to  an  agent  or  other  person  authorized  to  accept, 
the  fact  should  appear. 

In  the  present  case  the  only  evidence  of  presentment  is  the  certifi- 
cate of  protest.  The  notary  certifies  "  that  on,  etc.,  I  did  present 
the  annexed  draft  of  T.  C.  Wetmore  on  W.  W.  Peters,  at  the  store 
of  Silliman  and  Gardiner,  and  demanded  acceptance  of  the  same, 
which  was  refused,"  etc.  It  is  contended  that  this  is  not  evidence 
of  a  presentment  to  Peters  for  acceptance. 

The  statute  makes  notarial  certificates  evidence  of  the  facts  therein 
stated.  (2  R.  S.,  p.  91.)  The  notarial  certificate  is  clear  as  to  the 
fact  of  presentment,  the  place  of  presentment,  the  demand  of  accept- 
ance, and  the  refusal.  To  whom  was  it  presented  ?  Who  refused 
to  accept  ?  It  cannot  admit  of  doubt  that  Peters  himself  was  the 
person.  The  plain  English  of  the  protest  is  that  the  notary  found 
Peters  at  the  store  of  Silliman  and  Gardiner,  Troy,  N.  Y.,  and  there 
demanded  of  him  acceptance,  which  Peters  refused.  The  form  here 
used  seems  to  be  the  common  one  prescribed  by  the  books.  (Chitty 
on  Bills,  S33'i  Byles  on  Bills,  191.) 

The  language  is  not  even  obscure.  The  presentment,  the  demand, 
the  refusal,  all  clearly  mean,  that  it  was  the  drawee  who  was  the 
object  and  actor.  We  are  not  at  liberty  to  doubt  the  sufficiency  of 
the  evidence  that  the  bill  was  duly  presented  (or  acceptance. 

[The  Court  then  holds  the  notice  of  dishonor  suffii:ient.] 

Per  Curiam.  — Tlie  judgment  is  affirmed,  with  5  per  cent,  dam- 
ages and  costs.' 

'  It  would  seem  that  presentment  for  acceptance  must  be  made  to  the  drawee 
or  his  authorized   agent  in   person  and  that  diligent  inquiry  should  Ijl-  made  for 


638  PRESENTMENT    FOR   ACCEPTANCE.  [ART.   XII. 

§  242        FALL  RIVER  UNION  BANK  e-.   WILLARD.      [§  145J 

5  Metcalf  (Mass.)  216.  —  1S42. 

Action  against  indorser  of  bill.  The  jury  were  instructed  that  if 
the  drawees  were  informed  by  the  bank  that  it  held  such  a  bill  drawn 
on  them  by  A.  (and  indorsed  by  defendant),  and  they  thereupon 
informed  plaintiff  that  they  should  not  accept  nor  pay  it,  and  if  no 
notice  thereof  was  given  to  the  indorser  (defendant),  he  was  dis- 
charged.    Verdict  for  defendant. 

Hubbard,  J.  —  It  is  a  well  established  principle  of  the  law  regula- 
ting bills  of  exchange,  that  the  holder  of  a  bill,  payable  at  a  certain 
time  after  date,  need  not  present  it  for  acceptance  prior  to  the  day 
of  payment.  And  though  it  is  usual  and  safe  so  to  do,  as  he  thereby 
strengthens  his  security,  or,  in  case  of  non-acceptance,  acquires  an 
immediate  right  to  call  on  the  other  parties  to  the  bill,  yet  he  is 
under  no  legal  obligation  to  do  it,  nor  can  the  omission  be  taken 
advantage  of  by  the  drawer  or  indorsers.  {Goodall  v.  Do/ley,  i  T.  R- 
71 12;  Chit,  on  Bills,  Part  I.,  c.  5;  3  Kent,  Com.  [4th  ed.J  82;  O' Keefe 
V.  Dunn,  6  Taunt.  305;  s.  c,  i  Marsh.  613.) 

[The  court  then  decides  that  an  agreement  by  the  holder  made 
with  the  drawer  not  to  present  the  bill  for  acceptance,  but  only  for 
payment  at  maturity,  will  not  discharge  the  accommodation  indorser, 
although  such  agreement  was  not  known  or  assented  to  by  the 
indorser.] 

The  evidence  which  was  introduced  tended  to  show  that  the  cashier 
of  the  Fall  River  Union  Bank  (the  plaintiffs  in  this  suit)  met  Chace, 
one  of  the  house  upon  which  the  bill  was  drawn,  and   informed  him 

the  drawee  if  no  person  is  found  at  his  office  or  residence  having  Euthcrity  to 
accept  for  him.  Bank  v.  Triplctt,  l  Pet.  (U.  S.)  25,  34;  Wiseman  v.  Chiappella, 
23  How.  fU.  S.)  368,  377;  Cheek  v.  Roper,  5  Esp.  175.  It  has,  however,  been 
held  that  it  will  be  presumed  that  a  clerk  in  the  drawee's  counting- house  has 
authority  to  accept  or  refuse  to  accept.  Xelson  v.  Fottei-all,  7  Leigh,  (Va.)  180; 
Stainbaek  v.  State  Bank,  II  Gratr.  (Va.)  260.  '  Comparing  presentment  for 
acceptance  with  presentment  for  payment,  it  is  clear  that  the  two  cases  are  gov- 
erned by  somewhat  different  considerations.  Speaking  generally,  presentment 
for  acceptance  should  be  personal,  while  presentment  for  payment  should  be 
local.  A  bill  should  be  presented  for  payment  where  the  money  is.  Any  one 
can  then  hand  over  the  money.  A  bill  should  be  presented  for  acceptance  to 
the  drawee  himself,  for  he  has  to  write  the  acceptance;  but  the  place  where  it 
is  presented  to  hin  is  cornparatively  immaterial,  for  all  he  has  to  do  is  to  take 
the  bill.  A'jain  (except  in  the  case  of  demand  drafts),  the  day  for  payment  is  a 
fixed  day;  but  the  drawee  cannot  tell  on  what  day  it  may  suit  the  holder  to 
present  a  bill  for  acceptance.  These  considerations  are  material  as  bearing  on 
the  question  whether  the  holder  has  used  reasonable  diligence  to  effect  present- 
ment."    Chalmers,  Bills  of  Exchange  Act  (5th  ed.),  pp.  137-138. — Ed. 


II-]  WHEN   SUFFICIENT. 


639 


that  the  bank  had  the  draft  (now  in  suit),  upon  which  Chace  told 
the  cashier  that  they  should  not  accept  or  pay  it.  And  the  instruc- 
tion to  the  jury  was,  that  if  no  notice  thereof  was  given  to  the 
indorser,  he  was  discharged.  Waiving  the  question  whether  the 
cashier  was  agent  for  the  plaintiffs  for  the  purpose  of  presenting 
the  draft  for  acceptance,  or  not,  we  are  of  opinion  that  this  was  not 
a  due  presentment  of  the  bill  for  acceptance.  The  term  present- 
ment imports,  not  a  mere  notice  of  the  existence  of  a  draft  which 
the  party  has  in  his  possession,  but  the  exhibiting  of  it  to  the  person 
on  whom  it  is  drawn;  that  he  may  see  the  same,  and  examine  his 
accounts  or  correspondence,  and  judge  what  he  shall  do;  whether 
he  shall  accept  the  draft,  or  not.  Here  there  appears  to  have  been 
nothing  more  than  a  casual  meeting  of  the  parties,  and  the  conversa- 
tion on  the  subject  of  the  draft  ensued.  If  this  had  been  communi- 
cated, it  would  have  created  no  obligation  on  the  part  of  the  indorser 
to  make  present  payment,  and  consequently  such  conversation 
imposed  no  present  duty  on  the  holders,  as  to  the  other  parties  to 
the  bill.  With  this  view  of  the  case  we  are  not  satisfied  with  the 
instruction  given  to  the  jury.  To  confirm  it,  would  tend  to  intro- 
duce a  looseness  of  practice  on  the  subject  of  presenting  bills  for 
acceptance,  which  will  lead  to  disputes  and  difficulties  greater 
than  now  exist. 

Verdict  set  aside,  and  a  new  trial  granted.' 


§  242      TOMBECKBEE  BANK  7:  DUMELL  &  LYMAN.   [§  145] 
5  Mason  (U.  S.  C.  C.)  56.  —  iS2S.- 

Assumpsit  on  a  bill  of  exchange  drawn  on  17th  of  March.  1827,  in 
Alabama,  by  Stone,  Ellis  &:  Co.,  at  sixty  days'  sight,  on  the  defend- 
ants, for  $3,000,  payable  to  Moses  Sewall  or  order,  and  by  him 
indorsed  to  the  plaintiffs.  The  declaration  averred  a  presentment 
for  acceptance,  and  an  acceptance  and  a  subsequent  non-payment. 
There  were  other  counts  on  other  similar  bills.  Plea,  the  general 
issue. 

At  the  trial,  the  sole  defence  relied  on  was,  that  the  acceptance 
was  made  by  Jacob  Dumell  after  the  dissolution  of  the  partnership 

'  But  it  seems  that  the  actual  exhibition  of  the  1)111  is  not  necessary  11  the 
drawee  is  enabled,  without  seeing  it,  to  give  an  intelligent  response,  i  Daniel. 
§  462;  Fisher  v.  Beckwitk,  19  Vt.  31;  Burlington  First  X.  B.  v.  //,it,/i,  78  Mo, 
13.  Otherwise  an  extrinsic  acceptance,  as  by  telegram,  would  serve  no  needful 
purpose.     See  Neg.  Inst.  L.,  §  222  [134].  — Ed. 

2  s.  c,  24  Fed  Cas.  18. 


640  PRESENTMENT   FOR   ACCEPTANCE.  [ART.  XII. 

between  him  and  his  co-defendant,  John  Lyman.  It  appeared  m 
evidence,  that  the  firm  was  dissolved  on  the  ist  of  January,  1827; 
but  it  was  not  advertised  in  the  newspapers  until  the  5th  of  April, 
1827,  when  it  was  published  at  Providence,  where  the  firm  carried 
on  business.  The  acceptances  of  all  the  bills  were  after  the  dissolu- 
tion was  so  advertised. 

Story,  J.  —  Upon  this  statement  of  facts,  which  is  not  contro- 
verted, I  am  of  opinion,  that  the  plaintiffs  are  not  entitled  to  recover. 
No  partner  has  any  authority  after  a  dissolution  of  the  partnership 
to  bind  his  copartners  by  any  new  contract.  The  acceptance  of 
these  bills  is  altogether  a  new  contract.  It  is  true,  that  if  the  part- 
nership is  still  ostensibly  carried  on  in  the  name  of  the  firm,  and  no 
public  notice  is  given  of  the  dissolution  of  the  partnership,  though 
it  is  secretly  dissolved,  third  persons,  dealing  with  the  firm  upon  the 
faith  of  the  partnership  and  joint  responsibility,  are  entitled  to  hold 
all  the  partners.  But  it  is  otherwise,  where  the  dissolution  is  made 
public.  Here,  before  the  acceptance,  the  dissolution  was  publicly 
announced.  The  partners  had  not  held  out  to  the  payee,  or  the 
present  holders,  that  they  would  accept  the  bill.  Every  non-accepted 
bill  is  necessarily  taken  upon  the  faith  and  credit  of  the  drawer; 
and  no  person  can  bind  the  drawee  by  his  acceptance,  except  a  per- 
son having  an  express  or  implied  authority  for  that  purpose.  After 
the  dissolution  of  the  partnership,  and  a  public  notice  of  it,  there 
was  a  withdrawal  of  all  such  authority;  and  consequently  the  accept- 
ance, as  to  John  Lyman,  is  void.  Upon  principle  then,  the  action, 
being  joint  upon  a  joint  acceptance,  fails  as  to  both. 

Alan.  By  consent  of  the  parties,  the  plaintiff  discontinued  as  to 
Lyman,  amended  his  declaration,  and  took  a  judgment  against 
Dumel  alone.* 


§  242  SCHMITTLER  v.  SIMON.  [§  145] 

loi  New  York.  554.  —  1SS6. 
[Reported  herein  at  p.  183.]° 

'Such  an  acceptance  is  a  qualified  acceptance  (Neg.  Inst.  L.,  §  229  [141], 
subsec.  5),  and  binds  the  one  accepting  {Smith  v.  Milton,  133  Mass.  369),  but  if 
received  by  the  holder  discharges  prior  non-assenting  parties,  ante,  p.  631.  If  one 
of  the  drawees  refuses  to  accept  it  would  seem  unnecessary  to  make  a  further 
presentment  upon  the  others;  but  the  language  of  §  242  [145].  subsec.  i,  provides 
for  presentment  to  all. — Ed. 

'  See  §  245  [14S],  subsec.  i.— Ed. 


IV.]  EFFECT   OF   DISHONOR.  64I 

III.  When  presentment  for  acceptance  excused. 

§  245  Chitty  on  Bills  of  Exchange,  p.  307.  [§  148] 

If  the  drawee  of  a  bill  cannot  be  found  at  the  place  where  the 
bill  states  him  to  reside,  and  it  appear  that  he  never  lived  there,  or 
has  absconded,  the  bill  is  to  be  considered  as  dishonored  {A/ion. 
Ld.  Raym.  743);  but  if  he  has  only  removed,  it  is  incumbent  on  the 
holder  to  endeavor  to  find  out  to  what  place  he  has  removed,  and 
to  make  the  presentment  there  {Collins  v.  Butler,  2  Stra.  1087);  and 
he  should  in  all  cases  make  every  possible  inquiry  after  the  drawee, 
and  if  it  be  in  his  power  present  the  bill  to  him;  though  it  will  be 
unnecessary  to  attempt  to  make  such  a  presentment  if  the  drawee  has 
left  the  kingdom,  in  which  case  it  will  be  sufficient  to  present  the 
bill  at  his  house  {Crovnuell  ^.  Hyiison,  2  Esp.  211),  unless  he  have  a 
known  agent,  when  it  should  be  presented  to  him.  (Ibid;  Fhillips 
V  Astli/ig,  2  Taunt.  206.)  If  on  presentment  it  appears  that  the 
drawee  is  dead,  the  holder  should  inquire  after  his  personal  repre- 
sentative, and,  if  he  live  within  a  reasonable  distance,  should  present 
the  bill  to  him.'     (Molloy,  b.  2,  c.  10,  §  34;  Poth.  pi.  146.)' 


IV.  EfTeet  of  dishonor  of  bill  presented  for  acceptance. 

§  248  UNION  NAT.   BANK  v.   MARK'S  ADM'K.        [§  151] 

6  Bush  (Ky.)  614.  —  1S60. 
\_Reportcd  herein  at  p.  557.] 


§  248  WINTHROP  V.   PEPOON.  [§  151] 

I  Bay  (So.  Car.)  468.  —  1795. 

[Action  against  drawer  of  bill,  brought  l)efore  time  for  payment 
had  expired.  The  bill  was  presented  for  acceptance,  dishonoreil,  and 
duly  protested.] 

Upon  the  first  ground,  The  Court  were  clearly  of  opinion,  that 
the  action  lay  upon  the  protest  for  non-acceptance,  although  the 
time  for  payment  of  the  bill  was  not  expired.  Every  man,  by  the 
law  of  merchants,  who  draws  a  bill,  undertakes  by  the  very  art  of 
drawing  that  the  bill  shall  be  accepted  and  paid,  when  at  maturity, 

'  But  see  Smith  v.  Bauk,  L.  R.  4  I'-  ^-  '94;  2  Daniel,  §  1178.— Fn. 

2  Excuse  for  delay  is  to  be  distin>,'uished  from  excuse  from  presentment 
altogether.  U.  S.  v.  Barker,  i  Paine,  (U.  S.  C.  C.)  15^).  163;  Aymar  v.  Beers,  7 
Cow.  (N.  Y.)  705;  I  Daniel,  ^  478.— En. 

NEGOT.  INSTRUMENTS — 4I. 


642  PRESENTMENT    FOR   ACCEPTANCE.  [ART.  XII. 

agreeable  to  the  terms  of  the  bill.  And  the  very  end  and  design  of 
a  protest,  is  to  give  notice  of  non-acceptance;  or,  if  accepted,  of 
non-payment;  in  either  event,  the  drawer  becomes  liable.  And  the 
holder,  in  case  of  a  protest  for  non-acceptance,  is  under  no  obliga- 
tion to  wait  till  the  time  for  payment  expires;  because  the  drawer 
has  broke  part  of  his  original  contract,  that  is,  that  the  bill  should 
be  accepted;  and  because  also  (if  the  bill  should  even  be  paid  when 
due),  the  holder  would  lose  the  benefit  of  the  credit  in  trade,  which 
the  acceptance  of  a  bill  would  give  him,  as  well  as  the  use  of  the 
money,  which  he  might  obtain  at  a  small  discount.  The  obligation 
in  every  such  case  would  be  on  the  part  of  the  defendant  to  show 
that  the  bill  was  afterwards  paid,  which  might  be  given  in  evidence 
by  way  of  mitigation  of  damages.  But  in  this  case,  no  payment, 
even  at  this  day,  is  alleged;  therefore,  the  plaintiff  is  entitled  to  a 
recovery.      (Doug.  55;  3  Will.  17;   Kyd,  17.)' 

'  If  a  right  of  action  arises  on  presentment  for  acceptance,  no  new  right  arises 
on  presentment  for  payment.  Whitehead  v.  Walker,  9  M.  &  W.  506.  See 
Robinson  v.  Ames,  20  Johns.  146,  ante,  p.  633;  Stej-ry  v.  Robinson,  i  Day,  (Conn.) 
II.  But  if  there  is  an  acceptance  for  honor  or  a  reference  in  case  of  need,  there 
must  be  a  presentment  for  payment,  and  protest  for  non-payment,  before  present- 
ment to  the  acceptor  for  honor  or  referee  in  case  of  need.  Neg.  Inst.  L.,  §  2S6 
[167].— Ed. 


ARTICLE    XIII. 
Protest  of  Bills  of  Exchange. 
I.  What  instruments  must  be  protested. 

§  260  SUSSEX  BANK  r.  BALDWIN.  [§  152] 

17  New  Jersey  Law,  4S7.  —  1S40. 
\_Reported  herein  at  p.  501.]' 


II.  What  constitutes  sufficient  protest. 

§  261  DENNISTOUN  7\   STEWART.  [§  153] 

17  Howard  (U.  S.)  606.  —  1S54. 

Mr.  Justice  Grier  delivered  the  opinion  of  the  court. 

The  plaintiffs  declared  against  the  defendant,  as  drawer  of  a  bill 
of  exchange,  by  the  name  and  style  of  James  Reid  and  Co.,  of  which 
the  following  is  a  copy:  — 

No.  — .     ^^4.417  14-f-  11'^-  st'g.  MoniLE,  Sept.  9,  1S50. 

Sixty  days  after  sight  of  this  first  of  exchange,  (second  and  third  unpaid),  pay 
to  the  order  of  ourselves,  in  London,  forty-four  hundred  and  seventeen  pounds, 
14J.  \\d.  st'g,  value  received,  and  charge  the  same  to  the  account  of  1,058  bales 
of  cotton  per  '  Windsor  Castle.' 

Your  obedient  servants, 

Pr.  j)r()  James  Rkid  and  Co., 

W.M.    MolET,  Jk. 

To  Hy.  Gore  Booth,  Esq.,  LiverpooL 

[Acceptance  across  the  face  of  the  bill:] 

Seventh  October,  1850.     Accepted  for  two  thousand  five  hundred  and  seventy 

'  As  to  protest  of  inland  bills  and  promissory  notes,  see  Neg.  Inst.  L.,  §  189 
[118].  See  also  Shaw  v.  McNeill,  95  N.  C.  535,  un/e,  p.  .  566  Protest  is  now  neces- 
sary in  three  cases:  (i)  foreign  bills;  (2)  bills  accepted  for  honor;  and  (3)  bills 
containing  a  reference  in  case  of  need,  if  the  holder  desires  to  resort  to  the 
referee.  Neg.  Inst.  L.,  ^  286  [167].  Protest  is  proper,  but  not  necessary,  in  two 
cases:  (i)  inland  bills  and  promissory  notes;  (2)  for  better  security,  Si  2f)6  [15S]. 
The  protest  fpr  non-payment  after  protest  for  non-acceptance  is  anomalous;  it 
may  be  necessary  to  meet  the   requirc-mcnts  of  foreign  law.     tj  265  [157].  —  i'".i>. 

K'4.V1 


644  PROTEST   OF   BILLS.  [ART.  XIIL 

one  pounds  eighteen   shillings   and  seven  pence,  being  balance  unaccepted  for 
acpt.  1,058  b.  cotton,  pr.  Windsor  Castle,  payable  at  Glyn  and  Co. 

Pr.  pro.  Henry  Gore  Booth. 

And.  E.  Byrne. 
Due  9  Decern. 
[Indorsed;] 

Pay  Messrs.  A.  Dennistoun  and  Co.,  or  order. 

Pr.  pro.  James  Reid  and  Co. 

Wm.  Moult,  Jr. 

After  reading  this  bill,  with  its  indorsements,  the  plaintiff  offered 
in  evidence  a  regular  protest,  indorsed  on  a  copy  of  a  bill  agreeing 
in  every  particular  with  the  above,  except  that  for  "  And.  E.  Byrne  " 
was  written  "  Chas.  Byrne." 

The  defendant  objected  to  the  reading  of  the  protest  in  evidence, 
because  it  did  not  describe  the  bill  of  exchange  produced  by  the 
plaintiffs,  but  a  different  bill.  The  court  sustained  this  objection, 
and  excluded  the  protest  from  the  jury,  which  is  the  subject  of  the 
first  bill  of  exceptions. 

A  protest  is  necessary  by  the  custom  of  merchants  in  case  of  a 
foreign  bill,  in  order  to  charge  the  drawer.  It  is  defined  to  be  in 
form  "  a  solemn  declaration  written  by  the  notary  under  a  fair  copy 
of  the  bill,  stating  that  the  payment  or  acceptance  has  been  demanded 
and  refused,  the  reason,  if  any,  assigned,  and  that  the  bill  is,  there- 
fore, protested." 

A  copy  of  the  bill,  it  is  said,  should  be  prefixed  to  all  protests, 
with  the  indorsements  transcribed  rw^?///;/.  (i  Pardess.  444;  Chitty 
on  Bills,  458.) 

However  stringent  the  law  concerning  mercantile  paper,  with 
regard  to  protest,  demand,  and  notice,  may  appear,  it  is  nevertheless 
founded  on  reason  and  the  necessities  of  trade.  It  exacts  nothing 
harsh,  unjust,  or  unreasonable.  A  protest,  though  necessary,  need 
only  be  noted  on  the  day  on  which  payment  was  refused.  It  may 
be  drawn  and  completed  at  any  time  before  the  commencement  of 
the  suit,  or  even  before  the  trial,  and  consequently  may  be  amended 
according  to  the  truth,  if  any  mistake  has  been  made.' 

The  copy  of  the  bill  is  connected  with  the  instrument  certifying 
the  formal  demand  by  the  public  officer,  as  the  easiest  and  best  mode 
of  identifying  it  with  the  original.  Mercantile  paper  is  generally 
brief,  and  without  the  verbiage  which  extends  and  enlarges  more 
formal  legal  instruments.  Hence,  it  is  much  easier  to  give  a  literal 
copy  of  such  bills,  than  to  attempt  to  identify  them  by  any  abbrevia- 
tion or  description.  The  amount,  the  date,  the  parties,  and  the  con- 
ditions of  the  bill,  form   the   substance  of  every  such   instrument. 

'  See  §  263  [155].  —Ed. 


II.]  ESSENTIALS   OF   PROTEST.  645 

Slight  mistakes,  or  variances  of  letters,  or  even  words,  when  the 
substance  is  retained,  cannot  and  ought  not  to  vitiate  the  protest. 
A  lost  bill  may  be  protested,  when  the  notary  has  been  furnished 
with  a  sufficient  description,  as  to  date,  amount,  parties,  etc.,  to 
identify  it. 

In  indictments  for  forgery,  it  is  not  sufficient  to  state  the  "  sub- 
stance and  effect  "  of  the  instrument;  it  must  be  laid  according  to 
the  "  tenor,"  or  exact  letter;  but  the  law  merchant  demands  no 
such  stringency  of  construction.  The  sharp  criticism  indulged 
when  the  life  of  a  prisoner  is  in  jeopardy  cannot  be  allowed  for  the 
purpose  of  eluding  the  payment  of  just  debts. 

It  is  unnecessary  that  a  copy  of  the  protest  should  be  included  in 
the  notice  to  the  drawer  and  indorsers.'  The  object  of  notice  is  to 
inform  the  party  to  whom  it  is  sent  that  payment  has  been  refused 
by  the  maker,  and  that  he  is  held  liable.  Hence,  such  a  description 
of  the  note  as  will  give  sufficient  information  to  identify  it,  is  all 
that  is  necessary.  What  was  said  by  Mr.  Justice  Story,  in  delivering 
the  opinion  of  this  court,  in  Mills  v.  The  Bank  of  the  United  States,"^ 
with  regard  to  variances  and  mistakes  in  notices,  will  equally  apply 
to  protests:  "  it  cannot  be  for  a  moment  maintained  that  every 
variance,  however  immaterial,  is  fatal.  It  must  be  such  a  variance 
as  conveys  no  sufficient  knowledge  to  the  party  of  the  particular 
note  which  has  been  dishonored.  If  it  does  not  mislead  him,  if  it 
conveys  to  him  the  real  fact,  without  any  doubt,  the  variance  cannot 
be  material,  either  to  guard  his  rights  or  avoid  his  responsibility." 

In  the  case  before  us,  the  protest  had  an  accurate  copy  of  every 
material  fact  which  could  identify  the  bill  — the  date,  the  place 
where  drawn,  the  amount,  the  merchandise  on  which  it  was  drawn, 
the  ship  by  which  it  was  sent,  the  balance  on  the  cotton  for  which 
it  was  accepted,  the  names  of  drawers,  acceptor,  indorsor.s;  in 
fine,  every  thing  necessary  to  identify  the  bill.  The  only  variance 
is  a  mistake  in  copying  or  deciphering  the  abbreviations  and 
flourishes  with  which  the  christian  name  of  the  acceptor's  agent  is 
enveloped.  The  abbreviation  of  "And."  has  been  mistaken  for  Chas., 
and  the  middle  letter  E.  omitted.  The  omission  of  the  middle  letter 
would  not  vitiate  a  declaration  or  indictment.  Nor  could  the  mistake 
mislead   any  person  as  to  the  identity  of  the  instrument  descril)cd. 

We  are  of  opinion,  therefore,  that  the  objection  made  to  this 
protest,  "  that  it  does  not  describe  the  hill  of  exchange  produced, 

"Nor  even  mendon  of  protest.     Ex  parte  Lowcnthal,  L.  R.  9  Ch.  591.     N^r  «3 
the  certificate  of  protest  evidence  of  notice,  except  by  statute.     Bank  v.  Coy,  2 
Hill  (N.  Y.)  227,  antc\  p.  568.  —  Ed. 
"^Antc,  p.  564. —  En. 


646  PROTEST   OF    BILLS.  [ART.  XIIL 

but  a  different  bill,"  is  not  true  in  fact,  and  should  have  been  over- 
ruled by  the  court. 

This  renders  it  unnecessary  for  us  to  notice  the  offer  of  testimony 
to  prove  the  identity,  which  was  also  overruled  by  the  court. 

The  judgment  of  the  Circuit  Court  is  reversed,  and  voiire  de  noz'o 
awarded. 


§  261  CAYUGA  COUNTY  BANK  v.   HUNT.  [§  153] 

2  Hill  (X.  \ .)  635.  —  1S42. 

Assumpsit.  .  .  .  The  action  was  by  the  plaintiffs  as  indorsees 
against  the  defendant  as  indorser  of  a  bill  of  exchange  drawn  by 
James  Treat  on  Stephen  Sicard  &  Co.,  New  York,  and  accepted  by 
them. 

The  bill,  which  bore  date  January  i6th,  1S39,  was  payable  to  the 
order  of  the  defendant  at  ninety  days;  and  no  place  of  payment  was 
mentioned  therein.  On  the  trial,  after  proving  the  signature  of  the 
defendant  as  indorser,  the  plaintiffs  gave  in  evidence  a  notarial  certi- 
ficate of  protest,  stating  that  on  the  19th  day  of  April,  1839,  the 
notary  presented  the  bill  in  question  at  No.  4  Wall  street,  the  office 
of  the  acceptors,  but  found  the  same  closed  and  no  person  there  of 
whom  payment  could  be  demanded;  that  he  then  presented  the  same 
to  the  widow  of  Stephen  Sicard,  for  payment,  which  she  refused, 
saying  that  the  partner  of  her  late  husband  was  at  the  South,  and 
she  knew  nothing  of  it.  The  plaintiffs  also  read  in  evidence  a 
notarial  certificate,  stating  that  notice  of  protest  of  the  bill  in  ques- 
tion had  been  duly  given  to  the  defendant.  This  certificate  was 
dated  February  9th,  1841,  nearly  two  years  after  presentment  and 
protest.  No  further  evidence  was  offered  by  the  plaintiffs.  The 
defendant's  counsel  moved  for  a  nonsuit,  on  the  ground,  i.  That  the 
presentment  of  the  bill  in  question  to  the  widow  of  Stephen  Sicard, 
deceased,  was  insufficient  to  charge  the  indorser;  2.  That  it  did  not 
appear  from  the  certificate  of  protest  that  the  bill  was  presented  for 
payment  to  any  person  at  the  office  of  S.  Sicard  «Sc  Co.,  or  that  the 
notary  called  for  that  purpose  during  office  hours;  and  3.  That  the 
certificate  of  notice  of  protest  was  not  given  till  nearly  two  years 
after  protest  was  made.  The  judge  denied  the  motion,  and  th? 
defendant  excepted. 

By  the  Court,  Cowen,  J.  —  The  bill  of  exchange  was  payable  gen- 
erally, mentioning  no  place.  The  drawees  were  Stephen  Sicard  & 
Co.,  who  accepted  the  bill  as  a  firm,  thus  becoming  joint  debtors. 
On  the  death  of  Sicard,  he  was  discharged  at  law,  the  liability 
developing  on  the  surviving  partner  (Story  on  Partn.,  §  361,  362),  to 


11.]  ESSENTIALS   OF   PROTEST.  647 

whom  alone  the  plaintiffs  were  bound  to  have  the  bill  presented  for 
payment.  The  mode,  therefore,  in  which  the  bill  was  presented  to 
the  widow  and  supposed  personal  representative  of  Sicard,  or 
whether  she  were  in  fact  his  representative,  becomes  entirely  unim- 
portant. 

No  objection  was  made  at  the  trial  that  the  presentment,  which 
was  at  No.  4  Wall  street,  where  the  survivor  transacted  business, 
should  have  been  at  his  residence  or  any  other  place.  Therefore 
the  question  on  the  place  of  presentment  does  not  arise.  It  must  be 
taken  to  have  been  proper.  Nor  was  the  manner  of  presentment 
denied  to  be  proper;  nor  the  day. 

But  it  is  objected  that  the  time  of  day  should  have  been  mentioned 
in  the  notary's  certificate;  for  perhaps  it  might  have  been  after  the 
hours  of  rest.  The  certificate  states  that  it  was  presented  on  the 
third  day  of  grace.  This,  coming  from  a  witness  on  the  stand, 
would  be  deemed /r/wa /««>  evidence  of  presentment  at  a  proper 
time  in  the  day;  and  if  an  improper  hour  were  in  truth  selected,  it 
would  lie  with  the  adverse  party  to  show  the  fact  by  cross-examina- 
tion or  otherwise.  It  would  not  be  intended  that  a  late  hour  was 
resorted  to.  We  think,  therefore,  that  the  certificate,  in  fair  con- 
struction, imports  a  presentment  during  the  proper  hours  of  business. 
These,  except  where  the  paper  is  due  from  a  bank,  generally  range 
through  the  whole  day  down  to  bed-time  in  the  evening.  (Chitty 
on  Bills,  421  [r.].  Am.  ed.  1839,  and  cases  there  cited.)  It  would 
be  quite  a  forced  presumption  on  the  words  of  an  officer  saying  he 
presented  on  such  a  day,  to  fix  the  hour  either  before  or  after  that 
when  business  is  usually  transacted.  It  would  be  to  suppose  the 
notary,  at  the  expense  of  his  own  convenience,  going  at  an  improper 
hour  for  the  mere  sake  of  doing  wrong. 

It  is  no  objection  that  the  certificate  of  notice  was  drawn  up  by 
the  notary  two  years,  or  any  other  length  of  time,  after  notice  was 
given.  The  statute  gives  it  as  a  substitute  for  his  personal  testi- 
mony at  the  trial.  It  is  properly  called  for  and  may  l^e  drawn  up 
when  it  happens  to  be  wanted  as  evidence.  'J"hc  notary  cannot  be 
expected  always  to  prepare  it  as  a  matter  of  course;  for  iion  constat 
it  may  ever  be  wanted.  It  was  said  on  the  argument,  that  ordinarily 
it  is  drawn  up  and  transmitted  to  the  holder  at  or  about  ihe  time 
when  the  business  is  done.  That  is  the  better  practice;  l)ut  it  is  not 
essential. 

[Omitting  a  question  of  usury.] 

New  trial  denied. 


'"  Went  with   the   draft   to  the  bank  and  demanded  payment,"  is  sufficient. 
Batik  ^.Cameron,  7   Barb.  (N.  Y.)  I43-     "  Went  wilh  llic  wAn  and   made  demand 


648  PROTEST    OF    BILLS.  [ART.  XIIL 

III.  By  whom  protest  should  be  made. 

§262  CARTER  z'.  UNION  BANK.  [§  154! 

7  Humphrey  (Tenn.),  548.  —  1847. 

Green,  J.,  delivered  the  opinion  of  the  court. 

This  is  an  action  against  the  plaintiff  in  error,  as  the  indorser  of 
a  bill  of  exchange  drawn  in  Memphis,  Tennessee,  by  Arthur  Bowen 
on  Fort  and  Wilcox,  New  Orleans,  in  favor  of  plaintiff  in  error,  for 
$2,500,  and  by  him  indorsed.  The  bill  was  presented  at  maturity, 
payment  demanded  and  was  protested  for  non-payment  by  A.  B. 
Cends,  a  notary  public  of  New  Orleans.  The  instrument  of  protest 
states,  that  the  notary  "  by  his  deputy,  McDime,  Jr.,  presented  said 
draft  to  Mr.  Fort,  one  of  the  members  of  the  firm  of  Fort  and  Wilcox, 
the  acceptors,  at  their  ofifice,  and  demanded  payment  thereof,  and 
was  answered  that  the  same  would  not  be  paid."  The  protest  was 
made  the  nth  June,  1S45. 

By  an  act  of  the  General  Assembly  of  Louisiana,  passed  the  14th 
of  March,  1844,  it  is  made  lawful,  for  each  and  every  notary  public 
in  New  Orleans,  to  appoint  one  or  more  deputies,  to  assist  him  in 
making  of  protests  and  delivery  of  notices  of  protests  of  bills  of 
exchange  and  promissory  notes:  Provided,  that  each  notary  shall 
be  responsible  for  the  acts  of  each  deputy  employed  by  him;  and 
provided,  that  each  deputy  shall  take  an  oath,  faithfully  to  perform 
his  duties  as  such,  before  the  judge  of  the  parish  in  which  he  may 
be  appointed;  and  provided,  the  certificate  of  notice  of  protest  shall 
state  by  whom  made  or  served. 

The  defendant,  at  the  trial  below,  objected  to  the  protest  which 
was  offered  as  evidence,  which  objection  was  overruled  by  the  court, 
and  the  evidence  was  admitted.  The  jury  found  a  verdict  for  the 
plaintiff,  and  the  defendant  appealed  to  this  court. 

It  is  now  insisted,  that  this  protest  is  not  evidence  of  the  present- 
ment and  demand  of  the  bill,  because  it  states  that  the  demand  was 
made  by  the  deputy  of  the  notary. 

It  is  certainly  true,  as  the  general  rule,  that  a  foreign  bill  must  be 
presented  by  the  notary  in  person,  and  demand  of  payment  made  by 

at  maker's  office  and  person  in  charge  answered,  '  No  funds,'  "  is  sufficient. 
The  maker  is  entitled  to  have  the  note  exhibited,  yet  if  he  does  not  ask  to  see 
it,  and  refuses  payment  on  other  grounds,  the  presentment  is  sufficient.  Les;g 
V.   Vinal,  165  Mass.  555. 

A  certificate  that  the  notary  presented  the  draft  to  "  one  of  the  firm  of  Warren, 
Clark  &  Co.,"  is  insufficient  for  not  stating  the  name  of  the  person  on  whom 
demand  was  made.     Otsego  Co.  Bank  v.  Warren,  iS  Barb.  (N.  Y.)  290.  —  Ed. 


Ill-]  BY   WHOM    MADE.  649 

him,  and  that  the  demand  by  his  deputy  is  not  sufficient.  But  it  is 
seen,  that  the  law  of  Louisiana,  where  this  bill  was  payable,  author- 
izes the  employment  of  a  deputy  in  this  service,  and  that  the  protest 
must  certify  by  whom  the  demand  was  made. 

In  Story  on  Bills  (§  276),  treating  of  protest  of  foreign  bills,  it  is 
laid  down,  that  the  protest  "  should  be  made  out  and  drawn  up  in 
the  form  required  by  the  law  or  usage  of  the  place  where  it  is  made, 
and  that  so  essential  is  the  production  of  the  protest,  that  it  cannot 
be  supplied  by  mere  proof  of  noting  for  non-acceptance,  and  a  subse- 
quent protest  for  non-payment."  And  Mr.  Chitty  observes  (Chitty 
of  Bills,  3ss),  "  whenever  notice  of  non-acceptance  of  a  foreign  bill 
is  necessary,  a  protest  must  also  be  made,  which,  though  mere 
matter  of  form,  is  by  the  custom  of  merchants  indispensably  neces- 
sary, and  cannot  be  supplied  by  witnesses  or  oath  of  the  party,  or  in 
any  other  way,  and,  as  it  is  said,  is  a  part  of  the  constitution  of  a 
foreign  bill  of  exchange."  The  mere  production  of  this  protest,  in 
the  case  of  a  bill  payable  and  protested  out  of  the  country,  will  be 
evidence  of  its  dishonor,  "  and  to  it  all  foreign  courts  give  credit." 
And  at  page  456,  he  says:  "  With  respect  to  the  protest,  it  should 
always  be  made  according  to  the  law  of  the  place  where  the  payment 
ought  to  have  been  made,  though,  with  regard  to  notice  of  dishonor, 
it  must  be  given  to  the  drawer  within  the  time,  and  according  to  the 
law  of  the  place  where  the  bill  was  drawn,  and  to  the  indorsers 
according  to  the  law  of  the  place  where  the  indorsements  were 
made." 

These  authorities  settle  the  question,  and  establish  the  following 
propositions:  — 

1.  That  a  protest  is  indispensable  to  the  dishonor  of  a  foreign  bill 
of  exchange. 

2.  That  the  protest  is  to  be  made  according  to  the  law  of  the  place 
where  the  bill  is  payable. 

3.  That  the  protest  properly  authenticated,  is  evidence  by  its  mere 
production,  of  the  presentment  and  demand,  in  all  foreign  courts, 
where  the  dishonor  of  the  bill  is  required  to  be  proved. 

4.  That  no  other  evidence  of  the  facts  stated  in  the  protest  is 
competent. 

The  protest  in  the  present  case  was  made  according  to  the  law  of 
Louisiana,  where  the  bill  was  payable,  and,  therefore,  is  evidence 
here  of  the  dishonor  of  the  bill. 

It  is  objected,  that  there  is  no  evidence  that  Memphis  was  the 
defendant's  place  of  residence. 

It  appears,  that  annexed  to  the  name  of  the  defendant  on  ihc  1)111 
is  added  "Memphis,  Tennessee."     This  we  regard  as  part  of  his 


650  PROTEST   OF   BILLS.  [ART.   XIIL 

indorsement,  and  as  sufficient  authority  to  authorize  the  holder  to 
send  the  notice  to  Memphis. 

Affirm  the  judgment.' 


'  "  In  many  cases,  even  with  regard  to  foreign  bills  of  exchange,  the  protest 
'  may,  in  the  absence  of  a  notary,  be  made  by  other  functionaries,  and  even  by 
merchants.  But  where,  as  in  Mississippi,  a  justice  of  the  peace  is  authorized 
by  positive  law  to  perform  the  functions  and  duties  of  a  notary,  there  is  no 
ground  to  say  that  his  act  of  protest  is  not  equally  valid  with  that  of  a  notarv. 
Quoad  hoc  he  acts  as  a  notary."  —  Mr.  Justice  Story  in  Burke  v.  McKay,  2  How. 
(U.  S.)  66,  72  (1844).  Conf.  Toddv.  NeaVs  Adm'r,  49  Ala.  273;  Read  v.  Bank,  i 
T.  B.  Mon.  (Ky.)  92.  Costs  for  protest  cannot  be  allowed  where  the  protest  is 
by  a  private  individual  not  authorized  to  charge  fees.     Read  v.  Bank,  supra. — Ed. 


ARTICLE    XIV. 

Acceptance  for  Honor.(«) 

BYLES,  BILLS  OF  EXCHANGE,   Etc.   (13TH  ed.),   1879. 

[Chapter  XX.] 

When  acceptance  is  refused,  and  the  bill  is  protested  for  non- 
acceptance,  or  where  it  is  protested  for  better  security,  any  person  may 
accept  it  supra  protest,  (/;)  for  the  honor  of  the  drawer  or  of  any  one 
of  the  indorsers  The  method  of  accepting  supra  protest  \%  said  to 
be  as  follows,  viz. :  The  acceptor  supra  protest  must  personally 
appear  before  a  notary  public,  with  witnesses,  and  declare  that  he 
accepts  such  protested  bill  in  honor  of  the  drawer  or  indorser,  as 
the  case  may  be,  and  that  he  will  satisfy  the  same  at  the  appointed 
time;  and  then  he  must  subscribe  the  bill  with  his  own  hand, 
thus  —  "  Accepted  supra  protest  in  honor  of  A.  B.,"  etc.,(.-)  or,  as 
it  is  more  usual,  "  Accepts  S.  P."  And  a  general  acceptance  supra 
protest  which  does  not  express  for  whose  honor  it  is  made  is  con- 
sidered as  made  for  the  honor  of  the  drawer.  (</) 

Any  person  may  accept  a  bill  supra  protest;  and  the  drawee  himself 

{a)  Called  in  French,  "  Acceptation  par  Intervention,"  Code  de  Commerce, 
126.     Byles,  Ch.  XX. 

{b)  I  am  not  aware  of  any  authority  to  show  that  there  may  be  an  acceptance 
for  honor  without  a  protest,  and  the  statute  6&  7  Will.  4,  c.  58,  seems  to  assume 
that  bills  accepted  for  honor  are  always  protested:  see  Vandc7vall  \ .  Tyrrell,  M. 
&  M.  87;  Geralopulo  V.  IVit'L-r,  lo  C.  B.  690;  Bayley  (6th  ed.),  181;  Noupuier, 
Lettres  de  Change,  §^  584-591.  Unless,  indeed,  there  be  a  direction  to  another 
person  in  case  of  need:  Chitty  165,  236.  Where  the  direction,  in  case  of  need,  is 
appended,  it  is  said  to  be  necessary  to  present  a  foreign  bill  to  that  other  person. 
But  then  he  is  more  properly  an  original  alternative  drawee  than  an  acceptor  for 
honor.  As  to  a  direction  "  in  case  of  need  "  on  an  indorsement,  see  Lfoiuini  v. 
Wilson.  2  C.  &  M.  589.  There  seems  from  that  case  no  obligation  to  present 
an  inland  bill  (where  the  direction  in  case  of  need  is  given  by  an  indorser)  to 
the  party  to  whom,  in  case  of  need,  it  may  be  presented.  The  referee,  in  case 
of  need,  appointed  by  the  indorser,  though  agent  to  pay  the  bill,  is  not  agent  to 
receive  notice  of  dishonor:  In  re  Leeds  Banking  Company,  Law  Rep.  i  Equity 
76;  35  L.  J.  Ch.  33. 

(r)  Beawes,  pi.  38. 

((/)  Chitty  (glh  ed.),  344;   Beawes  39. 


652  ACCEPTANCE   FOR    HONOR.  [ART.  XIV. 

though  he  may  refuse  to  accept  the  bill  generally,  may  yet  accept  it 
supra  protest^  for  the  honor  of  the  drawer  or  of  an  indorser.((")  And 
though  we  have  seen  that,  after  one  general  acceptance,  there  can- 
not be  another  acceptance, (/)  yet,  when  a  bill  has  been  accepted 
supra  protest,  for  the  honor  of  one  party,  it  may,  by  another  individ- 
ual, be  accepted  supra  protest,  for  the  honor  of  another.  (^)  In  no  ' 
one  case  is  the  holder  obliged  to  take  an  acceptance  for  honor. (//) 

The  holder  of  a  dishonored  bill,  who  is  offered  an  acceptance  for 
the  honor  of  some  one  of  the  preceding  parties  to  the  bill,  should 
first  cause  the  bill  to  be  protested,  and  then  to  be  accepted  supra 
protest,  in  the  manner  above  described.  At  maturity  he  should 
again  present  it  to  the  drawee  for  payment,  who  may,  in  the  mean- 
time, have  been  put  in  funds  by  the  drawer  for  that  purpose.  If 
payment  by  the  drawee  be  refused,  the  bill  should  be  protested  a 
second  time  for  non-payment, (/)  and  then  presented  for  payment 
to  the  acceptor  for  honor. (/&)  Doubts  having  arisen  as  to  the  day 
when  the  bill  should  be  again  presented  to  the  acceptor  for  honor, 
or  referee,  in  case  of  need,  for  payment,  the  6  and  7  Will.  4,  c.  58,  . 
enacts  that  it  shall  not  be  necessary  to  present,  or  in  case  the 
acceptor  for  honor  or  referee  live  at  a  distance,  to  forward  for  pre- 
sentment, till  the  day  following  that  on  which  the  bill  becomes 
due.(/) 

In  a  case  which  attracted  much  attention,  it  was  proved  that  where 
a  foreign  bill,  drawn  upon  a  merchant  residing  in  Liverpool,  pay- 
able in  London,  is  refused  acceptance,  the  usage  is  to  protest  it  for 
non-payment  in  London.  The  bill  is  put  into  the  hands  of  a  notary, 
and  he  formerly  used  to  make  protest  at  the  Royal  Exchange,  but 
that  custom  is  obsolete:  the  notary  now  is  merely  desired  by  the 
holder  to  seek  payment  of  the  bill,  and  on  a  declaration  by  the 
holder  that  the  drawee  has  not  remitted  any  funds,  or  sent  to  say 
where  the  bill  will  be  paid,  the  notary  at  once  marks  it  as  protested 
for  non-paj^ment.  The  court  (with  the  exception  perhaps  of  Mr.  J. 
Bayley),  seemed  to  think  this  might,  if  the  bill  were  payable  in  Lon- 

[e)  Beawes  33.  And  it  has  been  held  in  America  that  it  is  no  objection  that 
the  acceptor  supra  protest  takes  the  guarantee  of  the  drawee.  Byles  on  Bills 
(6th  American  edition),  403. 

{/)  Jackson  V.  Hudson,  2  Camp.  447. 

(g)  Beawes,  pi.  42. 

{h)  Nutford  V.  VValcott,  12  ]\Iod.  410;  I  Ld.  Raym.  575,  s.  C;  Beawes,  37; 
Gregory  v.  Walcup,  Comb.  76;  Pillans  v.    Van  Mierop,  3  Burr,  1663. 

{i)  Hoare  v.  Cazenove,  16  East,  3gi. 

{k)  Williams  v.  Germaine,  7  B.  &  C.  477,  i  M.  &  R.  394,  s.  c. 

(/)  According  to  the  French  law  the  acceptor  for  honor  is  bound  to  give  notice 
to  the  person  for  whose  honor  he  accepts.     Code  de  Commerce,  127,  12S. 


ART.   XIV.]  FORM   AND    ESSENTIALS.  653 

don,  be,  in  ordinary  cases,  sufficient.  But  they  were  all  agreed  that 
it  would  not  have  been  sufficient  in  the  principal  case  to  charge  the 
acceptor  supra  protest^  because  the  acceptance  was  in  these  words,  — 
"  If  regularly  protested  and  paid  when  due,"  and  they  said  the 
drawees  could  not  be  said  to  refuse  unless  they  were  asked.  The 
court  also  appear  to  have  been  clear  that,  though  there  might  be 
cases  in  which  an  exhibition  of  the  bill  to  a  notary  in  London  is  suffi- 
cient, yet  that  in  all  cases  a  bill  may  be  sent  to  the  drawee,  and 
indeed  that  such  is  the  more  regular  course,  (w) 

By  the  2  and  3  Will.  4,  c.  98,  it  is  enacted  that  all  bills  made  pay- 
able by  the  drawee  in  any  place  other  than  his  residence  are,  on  non- 
acceptance,  to  be  without  further  presentment  protested  for 
non-payment  in  the  place  where  they  are  made  payable. 

The  undertaking  of  the  acceptor  supra  protest  is  not  an  absolute 
engagement  to  pay  at  all  events,  but  only  a  collateral  conditional 
engagement  to  pay  if  the  drawee  do  not.  "It  is,"  says  Lord 
EUenborough,  "  an  undertaking  to  pay,  if  the  original  drawee,  upon 
a  presentment  to  him  for  payment,  should  persist  in  dishonoring  the 
bill,  and  such  dishonor  by  him  be  notified  by  protest  to  the  person 
who  has  accepted  for  honor. "(;/)  The  learned  judge  proceeds  to 
lay  down  the  doctrine  that  a  second  protest  is  necessary;  observing: 
The  use  and  convenience,  and,  indeed,  the  necessity  of  a  protest 
upon  foreign  bills  of  exchange  in  order  to  prove,  in  many  cases,  the 
regularity  of  the  proceedings  thereupon,  is  too  obvious  to  warrant 
us  in  dispensing  with  such  an  instrument  in  any  case  where  the 
custom  of  merchants,  as  reported  in  the  authorities  of  law,  appears 
to  have  been  required. (^)  And  a  second  protest,  for  non-payment 
by  the  drawee,  is,  after  acceptance  supra  protest,  equally  necessary, 
in  order  that  either  the  holders  may  charge  the  acceptor  supra  pro- 
test, or  the  acceptor  supra  protest  may  charge  the  party  for  whose 
honor  the  acceptance  was  given.  The  object  of  an  acceptance  for 
honor  is  to  save  to  the  holder  all  those  rights  which  he  would  have 
enjoyed  had  the  bill  been  accepted  in  a  regular  manner.     If  the  bill 


(;«)  Mitchell  V.  Barinsr,  10  B.  &  C.  4;   M.  &  M.  381:  4  C.  &  P.  35. 

(«)  Hoare  v.  Cazenove,  16  East.  39i-  See  Vamh-wall  v.  Tyrrell,  M.  &  M.  87.  In 
America  it  is  held  that  where  a  draft  has  been  protested  for  non-acceptance,  the 
holder  is  not  bound  to  present  it  at  maturity  for  payment:  ExeUr  Haul:  v. 
Gordon,  8  New  Hamp.  66.  But  this  is  not  so  when  there  has  been  an  acceptance 
supra  protest.  An  acceptor  for  the  honor  of  the  drawer  cannot  recover  against 
him  without  proof  of  presentment  for  acceptance  or  payment  and  refusal,  and 
notice  to  the  drawer:  Barin^:  v.  Clark,  19  Pick.  220.  He  who  accepts  supra 
protest  is  not  liable  unless  demand  of  payment  is  made  on  the  drawee  and  notice 
of  the  refusal  given:   Schofieldv.  Bayard,  3  Wendell.  4yi. 

{0)  Ibid. 


654  ACCEPTANCE    FOR   HONOR.  [ART.    XIV. 

be  drawn  payable  at  a  certain  period  after  sight,  and  accepted  supra 
protest,  a  second  presentment  for  payment,  and  a  protest  and  notice, 
is  still  essential  for  the  purpose  of  enabling  the  hold-;r  to  sue  either 
drawer  or  acceptor  supra  protest,  or  enabling  the  latter  to  sue  the 
party  for  whose  honor  he  has  accepted.  And  the  time  which  the 
bill  has  to  run  is  computed,  not  from  the  date  of  the  exhibition  to 
the  drawee,  but  from  the  date  of  the  acceptance  supra  protest \p) 
Presentment  to  the  drawee,  and  protest,  must  be  averred  in  the 
declaration. (^)  The  acceptor  supra  protest  becomes  liable  to  all 
parties  on  the  bill  subsequent  to  him  for  whose  honor  the  acceptance 
was  made.(r) 

The  acceptor  supra  protest  admits  the  genuineness  of  the  signa-. 
ture,  and  is  bound  by  any  estoppel  binding  on  the  party  for  whose 
honor  he  accepts.  Thus,  where  a  bill  was  drawn  in  favor  of  a  non- 
existing  person  or  order,  but  the  name  of  the  drawer  and  the  name 
of  the  payee  and  first  indorser  were  both  forged  and  the  defendant 
accepted  for  the  honor  of  the  drawer,  it  was  held  that  the  defendant 
was  estopped  from  disputing  that  the  drawer's  signature  was  genuine, 
and  that  the  bill  was  drawn  in  favor  of  a  non-existing  person,  was 
negotiable,  and  had  become  payable  to  bearer. (i-) 

By  acceptance  supra  protest,  the  party  for  whose  honor  it  was 
made,  and  all  parties  antecedent  to  him,  become  liable  to  the 
acceptor  supra  protest  for  all  damages  which  he  may  incur  by  reason 
of  his  acceptance.  (/)  The  acceptor  supra  protest,  where  the  bill  has 
been  protested  for  better  security,  has  his  remedy  also  against  the 
acceptor.(//)  It  was  once  held  (r)  that  a  party  paying  for  the  honor 
of  the  drawer  had  no  claim  on  the  assignees  of  the  accommodation 
acceptor,  because  the  drawer  himself  had  none;  but  in  a  recent  case 
it  was  decided  that  he  could  recover  against  the  acceptor  whether 
the  acceptance  were  given  for  value  or  not. (7*:') 


(/)  Williams  v.  Gcrmaine,  7  B.  &  C.  468;   I  Man.  &  R.  394-  403.  s.  c. 

{(/)  Ibid. 

(r)  Hoarev.  Cazenovc,  16  East,  391;  Bayley  (6th  ed.),  17S;  Beawes,  33;  Marius, 
21;  Ex  parte  Wackerbath,  5  Ves.  574. 

{s)  Phillips  V.  Im  Thiirvt,  L.  R.,  i  C.  P.  22c 

(/)  Beawes,  47. 

(m)  Ex  parte  IVackerbath,  5  Ves.  574. 

{v)  Ex  parte  Lambert,  13  Ves.  179. 

(lu)  Ex  parte  Swan,  L.  R.,  6  Eq.  344.  In  America  it  is  held  that  if  a  third 
party  takes  up  a  bill  at  its  maturity  for  the  honor  of  the  drawer,  and  at  his 
request,  he  thereby  releases  the  accommodation  acceptor  of  such  bill,  whether 
he  intended  it  or  not.     See  Byles  on  Bills  (6th  American  ed.),  406. 


ART.  XIV.]  FORM   AXD    ESSENTIALS.  655 

SCHOFIELD  V.   BAYARD  AND  OTHERS. 

3  Wendell  (X.  Y.)  4SS.  —  1S30. 

This  was  an  action  of  assumpsit,  tried  at  the  New  York  circuit  in 
January,  1828,  before  the  Hon.  Ogden  Edwards,  one  of  the  circuit 
judges. 

The  defendants  drew  a  bill  of  exchange  in  the  name  of  Le  Roy 
Bayard  &  Co.,  (the  name  of  their  firm),  dated  New  York,  15th  August' 
1825,  upon  Messrs.  Crowder,  Clough  &  Co.,  of  Liverpool,  for  ^1,000 
sterling,  payable  in  London,  at  60  days  after  sight,  to  Mr.  E.  Peter- 
son, or   order,  and  by  him  indorsed   to  the  plaintiffs,  merchants  of 
Birmingham.      The  bill  was  protested  for  non-acceptance  on  the  loth 
September,  and  notice  given  to  the  defendants  on  the  17th  October, 
after   which   Baring  Brothers  &  Co.,  of  London,  accepted  it  supra 
protest  \n   these  words:     "Accepted  under  protest  and   account  for 
honor  of  the  drawers,  and  will  be  paid  for  their  account  if  needful, 
and  regularly  presented  when  due."     The  bill  was  subsequently  sent 
to  Liverpool  to  be  presented  to  the  drawees  for  payment.     The  cor- 
respondents of  the  plaintiffs  at  Liverpool,  on  the   10th  November, 
enclosed   the  bill  to  the  plaintiffs  in  a  letter,  with  advice  that  the 
presentation  should  be  made  in   London,  and  the  letter  was  put  in 
the  post-office  on  the  same  day,  in  season  for  the  mail  for  Birmino-- 
ham  on   that  day,  but  by  some  oversight  of  the  clerks  in  the  post- 
office  it  was  not  sent  until  the  next  day,  and  consequently  did  not 
reach  the  latter  place  until  the  12th  November,  which  was  Saturday. 
The  bill  could  not  be  forwarded  to  be  presented  in  season  on  that  day. 
and  Monday  after  was  too  late.     Had  the  letter  been  forwarded  from 
Liverpool  on  the  loth  by  the  mail  which  left  there  on  the  evening  of 
that  day,  it  would  have  reached  Birmingham  about  11  o'clock  a.  m. 
of  the   next  day,  and  might  have  been  forwarded  from  thence  to 
London  by  mail   on  the  afternoon  of  the  same  day  at  4  p.  m.,  and 
would  have  reached  London  in  sufficient  time  for  the  general  delivery 
of  letters,  between  9  and  10  o'clock  on  the  following  morning,  which 
would  have  been  in  season.     The  bill  reached  London  on  the  14th 
November,  and  payment  was  demanded  of  Messrs.  Baring  Brothers 
•S:    Co.,    who    gave    the    following    answer    in    writing:     "  Baring 
Brothers  &  Co.,  accepted  this  bill  conditionally,  viz.,   to  pay  it  if 
needful  and   regularly  presented   when  due.     The  bill  is  expressly 
made  payable   in   London,  where  payment  should  have  been  sought 
on  the   12th   inst. ;  that  has  not  been  done,  and  therefore  they  con- 
sider their  friends,  Messrs.  Le  Roy,  Bayard  cS:  Co.,  as  well  as  them- 
selves, are  acquitted  from  all  liability  by  such  irregularity."     The 
bill  was  protested  for  non-payment,  and  notice  given  to  the  defend- 


656  ACCEPTA^XE   FOR    HONOR.  [ART.   XIV. 

ants  on  the  loth  January,  1826.  Messrs.  Crowder,  Clough  &  Co. 
were  bankrupts  when  the  bill  was  drawn,  the  drawers  had  no  funds 
in  their  hands,  and  the  bill  would  not  have  been  paid  by  them  had 
it  been  presented  to  them  for  payment  when  due.  A  verdict  was 
taken  for  the  plaintiffs  for  the  principal,  damages,  exchange,  and 
interest,  subject  to  the  opinion  of  this  court  on  a  case  made. 

By  tJtc  Courl,  Savage,  Ch.  J. — Where  a  bill  is  accepted  supra  pro- 
test, the  holder  must  demand  payment,  and  if  refused,  notice  of  such 
refusal  must  be  given.  Such  acceptance  is  a  conditional  engage- 
ment; and  to  render  such  acceptor  absolutely  liable,  the  bill  must 
be  duly  presented  for  payment  to  the  drawee,  and  protested  in  case 
of  refusal.  (Chitty  on  Bills,  242;  16  East,  391.)  The  above 
authorities  say  the  payment  must  be  demanded  of  the  drawees;  but 
if  the  bill  is  payable  at  a  particular  place,  payment  must  be  demanded 
at  that  place. 

In  this  case  the  only  real  question  is,  whether  the  holder  is  excused 
by  reason  of  the  mistake  in  the  post-office  at  Liverpool,  from  not 
making  demand  in  season.'  It  is  proved  in  this  case  that  the 
drawees  were  bankrupt  when  the  bill  was  drawn,  and  had  no  funds 
of  the  drawers  at  that  time  or  since,  and  that  at  no  time  would  they 
have  accepted  or  paid  the  bill.  It  does  not  appear,  however,  that 
the  bill  would  not  have  been  paid  by  the  acceptors  had  it  been 
regularly  demanded.  In  the  case  of  Patience  v.  Towiiley  (2  Smith, 
223),  a  bill  drawn  on  Leghorn,  due  the  loth  September,  1800,  was 
not  demanded  till  the  31st  December;  Leghorn  being  then  occupied 
by  the  enemy,  or  in  some  such  critical  situation,  it  was  impossible 
to  present  it  in  season.  The  plaintiff  had  a  verdict,  which  the  court 
refused  to  set  aside,  Lord  Ellenborough  saying:  "  Duly  presented, 
is  presented  according  to  the  custom  of  merchants,  which  necessarily 
implies  an  exception  in  favor  of  those  unavoidable  accidents  which 
must  prevent  the  part}'  from  doing  it  within  the  regular  time;  "  and 
it  was  left  to  the  jury  to  say  whether,  from  the  situation  of  the 
country,  it  was  impossible  for  the  plaintiff  to  present  it  in  due  time. 
That  cause  presented  a  case  of  impossibility;  but  this  case  presents 
no  impossibility,  if  due  diligence  had  been  used.  The  plaintiff  should 
not  have  sent  the  bill  to  Liverpool  at  all.  It  is  true,  that  after  the 
letter  containing  it  had  been  left  at  Liverpool  on  the  loth  Novem- 
ber, it  could  not  have  reached  London  in  season;  but  it  was  the 
fault  of  the  plaintiffs  to  have  parted  with  the  bill  in  the  manner  they 
did.     Instead  of  sending  it  to  Liverpool,  they  should  have  sent  it  to 

'  See  Nag.  Inst.  L.,  §  141  [81].— Ed. 


ART.    XIV.]  FORM   AND   ESSENTIALS.  657 

London,  and  then  it  would  have  been  in  season,  and  probably  would 
have  been   paid. 

I  am  of  opinion,  that,  by  the  law  merchant,  payment  should  have 
been  demanded  in  London  on  the  12th  of  November;  and  that  not 
having  been  done,  and  there  being  no  impossibility  to  prevent  it  but 
what  is  attributable  to  the  want  of  due  diligence  on  the  part  of  the 
holders,  the  defendants  are  legally  discharged,  and  are  entitled  to 
judgment. 

NEGOT,  INSTRUMENTS  —  42. 


ARTICLE    XV. 

Payment  for  Honor. 

BYLES,   BILLS  OF  EXCHANGE,   Etc.   (13TH  ed.)   1879. 
[Chapter  XXL] 

Payment  supra  protest  is  where  a  bill  of  exchange,  having  been 
protested  for  non-payment,  is  paid  by  another  person  for  the  honor 
of  some  one  of  the  parties.  Any  party  to  a  bill  of  exchange,  whether 
drawer,  drawee,  payee  or  indorser,  may  pay  for  honor.  So  may  a 
mere  stranger,  without  any  previous  request  or  authority  from  the 
party  for  whose  honor  he  pays.  This  right  is  not  founded  on  the 
English  common  law,  but  is  a  provision  of  the  general  law  merchant, 
introduced  to  aid  the  credit  and  circulation  of  bills  of  exchange. 
It  extends  to  no  other  instrument.  Such  payment  should  be  pre- 
ceded, on  the  part  of  the  payer,  in  the  presence  of  a  notary  public, 
by  a  declaration  for  whose  honor  the  bill  is  paid,  which  should  be 
recorded  by  the  notary,  either  in  the  protest  or  in  a  separate  instru- 
ment. (</)  It  is  clear  that  there  can  be  no  payment  for  honor  till  the 
bill  is  dishonored  by  non-payment  ;(/>)  and  a  protest  is  essential,  (f) 
though  it  may  be  drawn  out  in  due  form  afterward. ((/) 

A  party  paying  a  bill  of  exchange  supra  protest  has  his  action 
against  the  party  for  whom  the  payment  was  made,  and  against  all 
other  parties  to  whom  the  party  could  have  resorted  for  reimburse- 
ment. (^')  But  he  thereby  discharges  all  the  subsequent  parties, 
although  that  discharge  does  not  prevent  his  relying  on  any  title 
they  may  have.(/) 

{a)  Beawes.  pi.  53;  Marius,  128;  Code  de  Commerce,  art.  15S. 

(U)  Deacon  v.  Stodhart,  2  Man.  &  Gr.  317. 

(c)  In  Vandewall\.  Tyrrell,  i  M.  &  M.  87,  so  held  by  Lord  Tenterden;  and  in 
Ex  parte  Wylde,  30  L.  J.  Bky.  10.  by  Lord  Campbell.  As  it  is  by  the  French 
Law,  Code  de  Commerce,  art.  15S,  and  by  the  law  of  Scotland,  Bell's  Comm. 
b.  3,  pt.  I,  c.  4,  §  367. 

{d)  Geralopulo  v.    IVieler,  10  C.  B.  690. 

(e)  Bayley  (6th  ed.)  318. 

(  f)  Code  de  Commerce,  art.  159.  In  America  it  is  held  that  an  acceptor ^w/ra: 
protest,  for  the  honor  of  the  first  indorser,  may  require  as  a  condition  of  payment 
that  the  holder  shall  indorse  the  bill  to  him.  See  Byles  on  Bills  (6th  American 
ed.),  408. 

[65S] 


ART.   XV.]  FORM   AND    ESSENTIALS.  659 

A  man  paying  for  honor  of  an  indorser  may,  if  he  choose,  give 
immediate  notice  to  the  prior  indorsers,  but  he  is  not  bound  so  to 
do.  He  may,  if  he  please,  send  the  protest  or  the  bill  or  notice  to 
the  indorser  for  whose  honor  he  pays,  and  any  subsequent  regular 
notice  given  by  that  party  (g)  will  suffice. 

It  is  conceived  that  a  man  cannot,  by  paying  supra  protest,  revive 
the  liability  of  an  indorser  already  discharged  by  laches. 

And  where  a  party  pays  generally  for  honor,  without  a  protest,  a 
bill  already  indorsed  in  blank,  he,  as  an  indorsee,  mav,  it  seems, 
sue  any  party  on  the  bill.(//) 

The  most  obvious  and  advantageous  course  to  be  pursued  by  a 
man  desiring  to  protect  the  credit  of  any  party  to  a  dishonored  bill 
is  simply  to  pay  the  amount  to  the  holder  and  take  the  bill  as  an 
ordinary  transferee. 

But  the  holder  may  possibly  object;  for  example,  the  bill  may 
not  have  been  indorsed  in  blank,  and  the  holder  may  refuse  to 
indorse  even  sans  recourse.  In  such  an  event  a  payment  supra  pro- 
test becomes  essential. 

The  party  paying  supra  protest  has  also  his  remedy  against  the 
acceptor,  and  that  whether  the  acceptance  was  given  for  value  or 
not,  unless  there  be  an  equity  attached  to  t'..t;  bill  amounting  to  a 
discharge.  (/) 

It  is  necessary  that  the  protest  should  be  made  before  payment. (/•) 

The  law  merchant  as  to  payment  supra  protest  does  not  extend  to 
promissory  notes,  which  are  not,  like  bills  of  exchange,  instruments 
calculated  or  intended  for  circulation  all  over  the  globe.  .Whoever, 
therefore,  pays  a  note  for  another  person  without  authority,  express 
or  implied,  does  so  at  his  peril. (/) 

In  ordinary  cases,  however,  \v;:j;-o  the  note  is  indorsed  in  blank, 
he  of  course  becomes  a  transferee  of  the  note." 


(,^)  Goodall  V.  Polhill,  14  L.  J.,  C.  P.  146;   i  C.  B.  233. 

(//)  Mcrlens  v.  Winniiigtoii,  i  Esp.  113.  But  see  the  observalions  on  this  case 
by  Lord  Campbell  in  Ex  parte  Wytde,  30  L.  J.  Bky.  10. 

(/)  Exparte  Wacl:erbatli,  5  Ves.  574;  Ex  parte  Swan,  L.  R.,  6  Eq.  344,  explain- 
ing and  overruling  Ex  parte  Lambert,  13  Ves.  179.  A  parly  taking  up  a  l)ill  for 
the  honor  of  any  party  to  it  succeeds  to  the  title  of  the  party  from  whom  he  took 
it,  and  is  in  effect  an  indorsee  by  the  law  merchant,  though  he  cannot  himself 
indorse:     Pothier,    vol.    4,    pt.    i,   ^^i    113,    114;   Nouguier,    Leltres    dc    Cliange, 

§§  584-591- 

(^)  Vandeivallv.  Tyrrell,  I  M.  &  M.  87.  Although  it  need  not  he  drawn  out 
in  full,  or  extended,  as  it  is  called,  till  afterwards:  ilrralopulo  v.  Wiel.i,  10  C. 
B.  690. 

(/)  Story  on  Promissory  Notes,  tj  453. 

'Payment  j/^/r^ /;Wr,r/ is  a  peculiarity  of  the  law  nicTchant.  Tlic  payer  for 
honor  is  practically  in  the  position  of  an  indorsee,  except  ihai  lie  discliarges  all 


66o  PAYMENT   FOR   HONOR.  [ART.  XV. 

parties  subsequent  to  the  one  for  whose  honor  he  pays.  It  has  been  held  that 
one  who  pays  for  the  honor  of  the  drawer  cannot  recover  against  an  accommo- 
dation acceptor.  McDowell  v.  Cook,  14  Miss.  420;  Gazzam  v.  Armstrong,  3 
Dana  (Ky.),  554;  2  Daniel,  §  1255.  But  this  doctrine  was  founded  upon  a  mis- 
apprehension of  the  facts  of  Ex  parte  Lambert  {11  Ves.  179).  arid  "the  doctrine  is 
distinctly  repudiated  in  Ex  parte  Swan  L.  R.,  6  Eq.  344-  By  Neg.  Inst.  L.,  §  304 
[175]  the  payer  for  honor  succeeds  to  the  rights  of  the  holder,  both  as  to  the 
parly  for  whose  honor  he  pays,  "and  all  parties  liable  to  that  party."  The 
clause  quoted  seems  to  leave  the  question  of  the  liability  of  the  accommodation 
acceptor  still  in  doubt.  —  Ed. 


ARTICLE    XVI. 
Bills  in  a  Set. 

BYLES,  BILLS  OF  EXCHANGE,  Etc.  (13TH  ed.)  1879. 
[Chapter  XXX.] 

Foreign  bills(«;)  are  often  drawn  in  parts,  all  the  parts  together 
making  what  is  called  a  set. 

Exemplars  or  parts  of  the  bill  are  made  on  separate  pieces  of  paper, 
each  part  being  numbered,  and  referring  to  the  other  parts.  Each 
part  contains  a  condition  that  it  shall  continue  payable  only  so  long 
as  the  others  remain  unpaid.  These  parts  should  circulate  together; 
or  one  may  be  forwarded  for  acceptance  while  the  other  is  delivered 
to  the  indorsee,  thus  relieving  him  from  the  necessity  of  forwarding 
his  part  for  acceptance,  but  giving  him  the  indorser's  security  imme- 
diately, and  diminishing  the  chances  of  losing  the  bill.(/')  Every 
transferor  is  bound  to  hand  over  to  his  transferee  all  the  parts  of 
the  bill  in  his  possession,  and  he  may  even  be  liable  to  hand  them 
over  to  a  subsequent  transferee,  if  he  have  them  still  in  his  pos- 
session.(^) 

The  whole  set,  of  how  many  parts  soever  it  be  composed,  consti- 
tutes but  one  bill,  and  the  regular  payment  and  cancellation  of  any 
one  of  the  parts  extinguishes  all.(</) 

A  firm,  who  were  both  payees  and  acceptors  of  a  foreign  bill  in 
three  parts,  indorsed  one  part  to  a  creditor  to  remain  in  his  hands 
until  some  other  security  were  given  for  it.  and  then  indorsed  another 
part  of  the  same  bill  for  value  to  a  third  person.  They  afterwards 
gave  the  first  indorsee  the  proposed  security,  and  took  back  the  first 
part  of  the  bill  from  him.      Held,  that  the  holder  of  the  second  part 

(a)  Nouguier  des  Lettres  de  Change,  i,  104. 

(i)  The  facility  which  drawing  a  bill  in  sets  affords  for  its  presentment  has 
been  held  to  accelerate  the  time  within  which  a  bill,  payable  after  sight,  ought 
to  be  presented  for  acceptance.     Strakcr  v.  Gyahain,  4  M.  &  VV.  721. 

(f)  Pinardv.  Klockmati,  32  L.  J.  Q.  B.  82;  3  Best  h  Smith,  388. 

(d)  Byles  on  Bills  (6th  American  edition),  578.  A  contract  to  deliver  up  a  bill 
drawn  in  parts  is  a  contract  to  deliver  up  every  part.  Kearmy  v.  IVcst  Cranda 
Mining  Company,  I  H.  &  N.  412. 

[661] 


562  BILLS    IN   A    SET.  [ART.   XVI. 

was  not  precluded  from  recovering  against  the  firm:  first,  because 
the  substitution  of  the  security  for  the  first  part  was  not  a  payment; 
and  secondly,  because  the  firm  were,  as  between  themselves  and  the 
second  indorsee,  estopped  from  disputing  the  regularity  of  their 
acceptance  and  indorsement  of  the  second  part.(d') 

But  as  between  bona  fide  holders  for  value  of  different  parts  of  the 
same  bill,  he  who  first  obtains  a  title  to  his  part  is  entitled  to  the 
other  parts,(/)  and  might,  it  has  been  said,  maintain  trover  for 
them,  even  against  a  subsequent  bona  fide  holder. (,^'-) 

If  a  man  be  under  an  obligation  to  deliver  a  foreign  bill,  it  seems 
he  is  bound  to  deliver  as  many  parts  as  may  be  applied  iox.{K) 

An  omission  on  one  part  to  express  the  reference  to  the  others, 
and  the  condition  relating  to  them,  may  have  the  effect  of  obliging 
the  drawer  to  pay  more  than  one  part.(/) 

The  drawee  should  accept  only  one  part.  For  if  two  accepted 
parts  should  come  into  the  hands  of  different  holders,  and  the 
acceptor  should  pay  one,  it  is  possible  that  he  may  be  obliged  to  pay 
the  other  part  also.(y) 

And  he  should  not  pay  without  taking  back  the  part  which  he  has 
accepted,(^)  for,  having  paid  the  unaccepted  part,  he  may  be 
obliged  afterwards  to  pay  the  accepted  part  also. 

And  if  the  indorser  improperly  circulate  two  parts  to  distinct 
holders,  he  may  be  liable  on  each.(/)  The  forgery  of  the  payee's 
indorsement  on  one  of  the  parts  will  of  course  pass  no  interest  even 
to  a  bona  fide  holder,  (w) 

It  is  conceived  that  an  indorser  is  not  bound  to  pay  any  one  part 
unless  every  part  bearing  his  indorsements  be  delivered  up  to  him.(;/) 


(e)  Holdsworth  v.  Hunter,  lo  B.  &  C.  449. 

(/)   Ibid;   Pcrrcira  v.  Jopp,  10  B.  &  C.  450  n. 

(§)  For  it  is  the  duty  of  a  person  taking  one  of  the  several  parts  to  inquire 
after  the  others.  Lang  v.  Smyth,  7  Bing.  2S4,  294,  5  M.  &  P.  78;  and  he  is  adver- 
tised by  the  part  which  he  does  take  that  he  takes  it  without  the  others  at  his 
periL 

{h)  I  Pard.  334.  But  since  each  part  is  now  subject  to  a  stamp,  if  issued  or 
negotiated  apart  (33  &  34  Vict.,  c.  97,  §  55),  it  may  be  doubtful  whether  he  is  so 
bound,  unless  the  party  applying  will  furnish  the  extra  stamps. 

lyi)  Davison  v.  Robertson,  3  Dow,  218,  228;  Beawes,  430;  Poth.  ill;  2  Pard. 
367.  But  not  an  inaccurate  reference  or  an  omission  to  name  one  part  obviously 
by  mistake.     Bayley  (6th  ed.),  30. 

(;■)  See  Holdsworth  v.  Hunter,  10  B.  &  C.  449. 

(k)  Code  de  Commerce,  art.  148. 

(/)  See  Holdsworth  v.  Htmter,  supra. 

{m)  Cheap  v.  Harley,  3  T.  R.  127.  See  Smith  v.  Mercer,  6  Taunt.  80;  i  Marsh, 
453,  s.  c;  Ftillcr  v.  Smith,  i  C.  &  P.  197;   Ry.  &  M.  49,  s.  c. 

(//)  Cour  de  Cassation,  4  Avril,  1S32;  Sirey,  t.  32,  1.  29. 


ART.  XVI.]       ACCEPTANCE  AND  TRANSFER.  66t, 

Copies  of  bills  are  not,  it  is  believed,  much  used  in  this  country. 
A  protest  may  be  made  on  the  copy  of  a  bill  in  some  cases. (r^)  But 
abroad,  when  a  bill  is  not  drawn  in  sets,  it  is  sometimes  the  practice 
to  negotiate  a  copy,  while  the  original  is  forwarded  to  a  distance 
for  acceptance. 

In  such  a  case  the  person  who  circulates  the  copy  should  transcribe 
the  body  of  the  bill,  and  all  the  indorsements,  including  his  own 
literally,  and,  after  all,  he  should  write  "Copy:— the  original 
being  with  such  a  person."  If  he  should  omit  to  state  that  the  bill 
is  a  copy,  or  to  write  his  own  indorsement  after  the  word  co/>\\  he 
may  become  liable  on  the  copy  as  on  an  original. (/) 

It  is  a  common  but  not  a  safe  practice  for  a  drawer,  to  whom  a 
negotiated  part  has  come  back  with  many  indorsements  on  it,  to  sub- 
stitute a  new  part  without  such  indorsements.  The  holder  of  such 
a  substituted  part  may  be  deprived  of  his  remedy  against  the 
acceptor  by  the  intermediate  act  of  the  drawer. (^) 


§  310  WALSH  V.   BLATCHLEY.  [§  178] 

6  Wisconsin,  422.  —  1853. 

The  plaintiff  declared  in  trespass  on  the  case  upon  promises,  for 
money  lent;  money  laid  out  and  expended;  money  paid  and  received 
by  the  defendants  for  the  use  of  the  plaintiff,  etc.;  and  gave  notice 
of  the  cause  of  action,  the  indorsement  by  defendants  upon  the  bill 
of  exchange,  copied,  and  served  with  the  declaration  as  follows: 

Express  Exch.ange  Office, 
Adams  &  Co.  Downieville,  San  Francisco. 

Exchange  for  $250.  Oct.  6,  1S54. 

No.  9,  917. 
At  sight  of  this    second  of  exchange  —  first  and  third  unpaid  —  pay  to  the 
order  of  Phoebe  Blatchley,   two  hundred  and  fifty  dollars  value  received,   and 

place  to  account  of  exchange. 

Ada.ms  &  Co. 
To  Messrs.  Adams  k  Co.,  New  York. 
(Countersigned), 

S.  W.  Langworthy,  C.  B.  M.*cv,  Agents. 
Indorsed  by  Phoebe  Blatchley  to  Henry  Dart  or  order,  and  by  J.  Henry  Dart 
to  P.  O.  Strang  or  order,  and  by  Strang  to  P.  Walsh  or  order. 

The  defendants  plead  the  general  issue;  and  by  mutual  agreement 
of  counsel  the  cause  was  tried  before  the  circuit  judge,  without  the 
intervention  of  a  jury,  who  found,  and  reported  in  writing  with  his 

{0)  Dehers  v.  Harriot,  i  Show.  163. 

(/)  Cour  Royale  de  Paris,  14  Janvier,  1830;  Sirey,  I.  30,  1.  172. 

(^)  Ralli  V.  Deitiiistoun,  6  Exch.  483. 


664  BILLS   IN   A   SET.  [ART.  XVI. 

decision,  the  facts  and  conclusions,  and  recited  in  full  in  the  opinion 
of  the  court  therein. 

By  the  Court ^  Cole,  J.  — This  case  was  tried  by  the  court  without 
the  intervention  of  a  jury,  and  the  judge  found  the  following  facts: 

First.  That  the  action  is  brought  upon  the  bill  of  exchange  intro- 
duced in  evidence,  and  described  in  the  plaintiff's  declaration.  That 
this  bill,  which  is  the  second  of  the  set,  was  indorsed  by  the  defend- 
ants on  a  Sunday. 

Second.  That  the  first  of  the  set  was  sold  by  defendants  to  plain- 
tiff about  the  ist  of  January,  1855.  That  the  plaintiff,  without  delay, 
sent  the  same  by  mail  to  his  correspondent  in  New  York  city,  the 
residence  of  the  drawee,  for  presentation  for  payment.  That  by- 
some  delay  in  the  mail  the  letter  did  not  reach  New  York  until  the 
9th  of  April  following,  at  which  time  the  letter,  with  inclosure,  was 
duly  received  by  the  said  correspondent.  That  the  bill  was  not  pre- 
sented for  payment. 

Third.  That  in  the  last  of  March,  the  plaintiff,  fearing  the  said 
first  bill  was  lost,  procured  the  defendants  to  indorse  and  deliver  to 
him  the  second  of  the  set,  and  had  it  presented  on  the  third  day  of 
April  following  for  payment,  to  the  drawee,  and  payment  was  refused. 
The  bill  was  duly  protested,  and  proper  notice  given  to  the  defend- 
ants, who  were  indorsers. 

The  conclusions  of  law  which  the  court  drew  from  these  facts, 
were,  "  ist.  That  the  liability  in  this  action,  if  any  at  all,  is  upon 
the  second  bill  of  the  set,  and  not  on  the  first;  2d.  That  because 
the  said  bill  was  indorsed  on  Sunday,  that  therefore  such  indorse- 
ment was  absolutely  void." 

We  have  examined  with  considerable  care  the  authorities,  and 
have  not  been  able  to  find  a  case  precisely  like  the  present,  although 
it  would  seem  as  if  the  point  must  frequently  have  arisen  in  the 
courts  in  this  country,  and  in  England.  The  case  of  Perreira  v. 
Jepp  et  al.  (cited  in  a  note  on  page  449,  11  B.  and  C),  would  seem 
to  have  a  strong  bearing  upon  the  case  at  bar.  It  was  there  held 
that  he  to  whom  any  part  of  the  set  is  first  transferred,  acquires  a 
property  in  all  the  other  parts,  and  may  maintain  trover  even  against 
a  bona  fide  holder,  who  subsequently,  by  transfer,  or  otherwise,  gets 
possession  of  another  part  of  the  set.  That  is,  deciding  that  the 
first  indorsement  of  one  of  the  set  vests  in  the  indorsee  the  absolute 
right  to  the  possession  of  the  whole  set.  And  we  suppose  it  would 
follow,  from  this  doctrine,  that  the  indorsement  of  the  second  in  this 
case  was  entirely  unnecessary.  The  liability  of  the  indorser  arose 
from  indorsing  the  first  of  the  set  for  value.  We  think  her  liability 
was  not  increased  one  jot  or  tittle  by  indorsing  the  second  of  the  set. 
Suppose  she  had  indorsed  all  of  them  in  January,  at  the  time  she 
indorsed  the  first,  is  it  not  obvious  that  her  liability  would  not  have 
been  different  from  what  it  is?     It  is  conceded  that  the  indorsement 


ART.  XVI.]  ACCEPTANCE    AND    TRANSFER.  665 

of  the  first  was  good,  and  this  indorsement  was  entirely  adequate  to 
carry  with  it  the  second  and  third.  (See  Edwards  on  JBiils,  304  and 
162;  Holdsworthx.  Hunter,  10  B.  C.  449;  Kcmwrthy  v.  Hopkins.  1 
Johns.  Cas.  107.)  Either  of  the  set  may  be  presented  for  accept- 
ance, and,  if  not  accepted,  a  right  of  action  arises  upon  due  notice, 
against  the  indorser.  {Doumes  and  Co.  v.  Church,  13  Peters,  205.) 
The  bill  upon  which  the  protest  was  made  was  declared  on  and  pro- 
duced, and  it  also  appeared  that  the  first  had  not  been  presented  for 
payment.  The  court  says,  and  we  think  properly  and  correctly, 
that  if  the  first  had  been  presented  for  payment  and  protested,  even 
as  late  as  April  9th,  that  upon  proper  notice  the  indorser  would  have 
been  held,  for  the  delay  in  the  mail  would  have  been  a  sufficient 
excuse  for  the  apparent  neglect  in  not  presenting  it  for  acceptance 
before.  The  case  might  have  been  relieved  from  all  doubt  or  difti- 
culty,  had  the  indorsee  declared  upon  the  first  of  the  set,  and  pro- 
duced on  the  trial  the  second,  which  had  been  presented  for  accept- 
ance and  dishonored.  {Wells  v.  Whitehead,  15  Wend.  527.)  This 
he  did  not  see  fit  to  do,  but  we  think  he  was  entitled  to  recover  even 
as  the  facts  appeared  before  the  court. 

The  judgment  is  reversed,  and  a  new  trial  ordered.' 


'  It  seems  that  an  indorsee  has  no  right  to  demand  the  other  parts  except  from 
his  immediate  indorser.  Thus,  the  fourth  indorsee  cannot  maintain  an  action 
against  the  second  indorser  for  outstanding  parts  of  the  set.  Pinard  v.  Klock- 
?nann,  3  B.  &  S.  388;   s.  C,  32  L.  J.,  Q.  B.  82. 

In  an  action  against  the  acceptor  on  one  part  of  the  set,  the  holder  need  not  file 
the  other  part  or  parts.  Johnson  v.  Offutt,  4  Met.  (Ky.)  19.  In  an  action 
against  the  indorser  on  the  second  part,  after  dishonor  by  non-acceptance,  the 
holder  need  not  account  for  the  first  part;  it  is  a  matter  of  defence  "  to  show 
either  that  some  other  bill  of  the  set  has  been  presented  and  accepted,  or  paid; 
or  that  it  has  been  presented  at  an  earlier  time  and  dishonored,  and  due  notice 
has  not  been  given;  or  that  another  person  is  the  proper  holder,  and  has  given 
notice  of  his  title  to  the  party  sued;  or  that  some  other  ground  of  defence  exists, 
which  displaces  the  prima  fade  title  made  out  by  the  plaintiff."  Do-.^iics  v. 
Church,  13  Pet.  (U.  S.)  205;  Miller  v.  Palmer,  58  Md.  452.  But  where  the  second 
of  the  set  is  protested  for  non-acceptance,  the  holder  must  produce  that  number 
of  the  set,  because  otherwise  it  may  have  been  accepted  supra  protest  for  the 
honor  of  the  defendant,  and  he  be  liable  upon  it.  Wells  v.  Whitehead,  15  Wend. 
(N.  Y.)  527.  If  the  drawee  accepts  more  than  one  part,  he  is  liable  on  each  lo 
holders  in  due  course.  Iloldsworth  v.  Hunter,  10  B.  &  C.  449;  Bank  v.  Neal,  22 
How.  (U.  S.)  96.  If  the  drawee  dishonors  one  part,  but  subsequently  honors  and 
pays  the  other  part,  the  drawer  is  discharged.  Page  v.  Warner,  4  Calif. 
395.  —  Ed. 


ARTICLE    XVII. 
Promissory  Notes  and   Checks. 

I.  Promissory  notes. 

I.  Origin  and  History. 

§  320  GOODWIN  V.  ROBARTS.  [§  184] 

L.  R.  10  Exchequer,  337.  —  1875. 
\_Iiepo  rted  herein  at  p.  i^x,  1 5  4- 1 5  5 ,  ] ' 


'  See  also  ante,  pp.  145-146. 

The  statute  of  3  &  4  Anne,  c.  9,  §  i  (1704),  provided  that,  "Whereas  it  hath 
been  held,  that  notes  in  writing,  signed  by  the  party  who  makes  the  same, 
whereby  such  party  promises  to  pay  unto  any  other  person,  or  his  order,  any 
sum  of  money  therein  mentioned,  are  not  assignable  or  indorsable  over,  within 
the  custom  of  merchants,  to  any  other  person;  and  that  such  person  to  whom 
the  sum  of  money  mentioned  in  such  note  is  payable  cannot  maintain  an 
action,  by  the  custom  of  merchants,  against  the  person  \vho  first  made  and 
signed  the  same;  and  that  any  person  to  whom  such  note  should  be  assigned, 
indorsed,  or  made  payable,  could  not,  within  the  said  custom  of  merchants, 
maintain  any  action  upon  such  note  against  the  person  who  first  drew  and 
signed  the  same:  Therefore,  to  the  intent  to  encourage  trade  and  commerce, 
which  will  be  much  advanced  if  such  notes  shall  have  the  same  effect  as  inland 
bills  of  exchange,  and  shall  be  negotiable  in  like  manner,  be  it  enacted,  etc., 
(i)  That  all  notes  in  writing  that,  after  [May  ist,  1705],  shall  be  made  and  signed 
by  any  person  .  .  .  whereby  such  person  .  .  .  doth  or  shall  promise  to 
pay  to  any  other  person  or  persons,  .  .  .  his,  her  or  their  order,  or  unto 
bearer,  any  sum  of  money  mentioned  in  such  note,  shall  be  taken  and  construed 
to  be,  by  virtue  thereof,  due  and  payable  to  any  such  person  or  persons  ...  to 
whom  the  same  is  made  payable;  (2)  and  also  every  such  note  payable  to  any 
person  or  persons,  .  .  .  his,  her,  or  their  order,  shall  be  assignable  or  indors- 
able over  in  the  same  manner  as  inland  bills  of  exchange  are  or  may  be, 
according  to  the  custom  of  merchants;  (3)  and  that  the  person  or  persons  .  .  . 
to  whom  such  sum  of  money  is  or  shall  be  by  such  noie  made  payable,  shall 
and  may  maintain  an  action  for  the  same,  in  such  manner  as  he,  she,  or 
they  might  do  upon  any  inland  bill  of  exchange,  made  or  drawn  according  to 
the  custom  of  merchants,  against  the  person  or  persons  .  .  .  who  signed 
the  same;  (4)  and  that  any  person  or  persons  ...  to  whom  such  note 
is  indorsed  or  assigned,  or  the  money  therein  mentioned  ordered  to  be 
paid  by  indorsement  thereon,  shall  and  may  maintain  his,  her,  or  their  action 
for  such  sum  of   money,  either    against  the  person   or    persons     .     .     .     who 

[666] 


■I-  3-]  NON-NEGOTIABLE   NOTES.  66"] 

2.   Form  and  Interpretation. 
See  Article  II,  pp.  161-324,  ante. 


3.   Non-Negotiable  Notes, 

§  320  SMITH  V.  KENDALL,  Executor.  [§  184] 

6  Term  Reports,  123.  —  1794. 

Assumpsit  on  the  following  instrument,  given  by  defendant's 
testator:  — 

Three  months  after  date  I  promise  to  pay  to  Mr.  Smith,  currier,  40/,  value 
received  in  trust  for  Mrs.  E.  Thompson,  as  witness  my  hand. 

L.  Askew. 
25    June,  1787. 

The  action  was  commenced  September  26,  1793.  Defendant 
objected  that  the  instrument  was  not  a  promissory  note  within  the 
statute  (3  and  4  Anne,  c.  9),  and,  if  not,  the  cause  of  action  accrued 
Sept.  25,  1787,  three  months  after  the  date  of  the  note,  and  conse- 
quently that  si.x  years  had  elapsed  before  the  suing  out  of  the  writ, 
and  that  the  cause  of  action  was  barred  by  the  statute  of  limitations. 

Verdict  for  defendant,  with  leave  to  plaintiff  to  move  to  set  that 
verdict  aside,  and  to  enter  a  verdict  for  him,  if  this  Court  thought 
he  was  entitled  to  recover.     Motion  accordingly. 

Lord  Kenyon,  C.  J.,  said.  If  this  were  res  Integra,  and  there  were 
no  decisions  upon  the  subject,  there  would  be  a  great  deal  of  weight 
in  the  defendant's  objection;  but  it  was  decided  in  a  case  in  Lord 
Raymond  (2  Lord  Raym.  1545),  on  demurrer,  that  a  note  payable  to 
B.,  without  adding  or  to  his  order,  or  to  bearer,  was  a  legal  note 
within  the  act  of  Parliament.  It  is  also  said  in  Marius  that  a  note 
may  be  made  payable  either  to  A.  or  bearer,  A.  or  order,  or  to  A. 
only.  In  addition  to  these  authorities  I  have  made  inquiries  amoi\g 
different  merchants  respecting  the  practice  in  allowing  the  three 
days'  grace,  the  result  of  which  is  that  the  Bank  of  England  and  the 
merchants  in  London  allow  the  three  days'  grace  on  notes  like  the 
present.     The  opinion   of  merchants  indeed  would  not  govern  this 

.  .  .  signed  such  note,  or  against  any  of  the  persons  that  indorsed  the 
same,  in  like  manner  as  in  cases  of  inland  bills  of  exchange." 

The  statute  was  held  to  apply  to  foreign,  as  well  as  domestic,  notes.  .1///w 
V.  Graham,  i  Barn.  &  Cress.  192.  Statutes  of  like  tenor  have  been  passed  in  the 
American  States,  i  Daniel,  §  5.  Independent  of  statute,  some  States  have 
held  promissory  notes  to  be  negotiable  by  force  of  common  law.  Diiitu  v. 
Adams,  I  Ala.  527;  Irvin  v.  Maury,  i  Mo.  194.  Sec  i  Parsons,  Bills  and  Notes 
(2d  ed.),  pp.  9-13;  Story  on  Prom.  Notes,  g  6.  —  Ed. 


668  PROMISSORY    NOTES.  [ART.   XVII. 

Court  in  a  question  at  law,  but  I  am  glad  to  find  that  the  practice  of 
the  commercial  world  coincides  with  the  decision  of  a  court  of  law. 
Therefore,  I  think  that  it  would  be  dangerous  now  to  shake  that 
practice,  which  is  warranted  by  a  solemn  decision  of  this  Court,  by 
any  speculative  reasoning  upon  the  subject;  and  consequently  this 
rule  must  be  made  absolute  to  enter  a  verdict  for  the  plaintiff. 

Rule  absolute.' 


§  320  CARNWRIGHT  r.   GRAY,   Executor.  [§  184] 

127  New  York,  92.  —  1S91. 

Action  on  the  following  instrument,  executed  by  defendant's 
testator: — 

QuARRVViLLE,  September  1^  1S71. 

Thirty  days   after  death,  I    promise  to  oay  to  Cornelius  Carnwright  fifteen 

hundred  dollars,  with  interest. 

Samuel  P.  Freligh. 

Plaintiff  gave  no  evidence  of  consideration,  but  jiroved  the  genuine- 
ness of  the  signature,  put  the  note  in  evidence,  and  rested  his  case. 
Judgment  for  plaintiff.      Defendant  appeals. 

Brown,  J.  — When  the  plaintiff  rested  his  case  and  again  at  the 
close  of  the  testimony  the  defendant  moved  to  dismiss  the  complaint 
upon  the  ground  that  no  proof  had  been  given  that  the  instrument 
sued  upon  had  any  consideration.  These  motions  were  denied  and 
the  court  instructed  the  jury  that  the  instrument  was  a  promissory 
note  and  imported  a  consideration,  and  that  the  burden  rested  upon 
the  defendant  to  show  that  it  was  without  a  consideration. 

The  exceptions  to  these  rulings  present  the  principal  question 
argued  upon  this  appeal. 

The  statute  of  this  state  in  reference  to  promissory  notes  provides 
as  follows  (I  R.  S.  768): 

§  I.  All  notes  in  writing,  made  and  signed  by  any  person,  whereby 
he'^  shall  promise  to  pay  to  any  other  person  or  his  order,  or  to  the 
order  of  any  other  person,  or  unto  the  bearer,  any  sum  of  money 
therein  mentioned,  shall  be  due  and  payable  as  therein  expressed; 
and  shall  have  the  same  effect  and  be  negotiable  in  like  manner  as 
inland  bills  of  exchange,  according  to  the  custom  of  merchants. 

§  4.  The  payees  and  indorsees  of  every  such  note  payable  to  them 
or 'their  order  and  the  holders  of  every  such  note  payable  to  bearer, 


'  Grace  is  allowed  on  non-negotiable  notes.  Duncan  v.  Maryland  Savings 
Inst.,  10  Gill  &  J.  (Md.)  299;  Dubuys  v.  Farmer,  22  La.  Ann.  478;  Cox  v.  Rein- 
kardt,  41  Tex.  591.  Contra:  Luce  v.  Shoff,  70  Ind.  152.  The  matter  is  now 
unimportant  where  days  of  grace  are  abolished.  Neg.  Inst.  L.,  ;^  I45 
[85].  -  En 


I-  3]  NON-NEGOTIABLE   NOTES.  669 

may  maintain  actions  for  the  sums  of  money  therein  mentioned, 
against  the  makers  and  indorsers  of  the  same  respectively,  in  Hke 
manner  as  in  cases  of  inland  bills  of  exchange,  and  not  otherwise.' 

Our  statute  is  a  substantial  reenactment  of  the  statute  of  Anne 
(3  and  4  Anne,  c.  9),  which  provided  that:  "  All  notes  signed  by  a 
person  promising  to  pay  to  another  his,  her  or  their  order  or  to 
bearer  "  should  be  construed  to  be  by  virtue  thereof  due  and  payable 
to  any  such  person  to  whom  the  same  is  made  payable,  etc.,  etc. 

This  statute  was  held  by  the  courts  of  England  to  include  within 
its  terms  a  non-negotiable  note.  {Smith  v.  Kendall,  6  D.  &  E.  123; 
Burchell  v.  Siocock,  2  Ld.  Raym.  1545;  3  Kent's  Com.  77.)  In  the 
case  first  cited  Lord  Kenyon  said:  "  A  note  may  be  made  payable 
to  '  A.'  or  bearer,  '  A.'  or  order,  or  to  '  A.'  only."  Similar  decisions 
were  made  by  the  courts  of  this  State  under  our  own  statute.  {Dcnun- 
ing  V.  Backoistoes,  3  Caines,  137;  President  v.  Hiirtin,  9  Johns.  217; 
Kimball  v.  Huntington,  10  Wend.  675;  Hall  v.  Farmer,  5  Denio,  4S4.) 

In  Dcnvning  v.  Baekenstoes  a  non-negotiable  note  was  declared  on 
as  within  the  statute  and  the  defendant  demurred  on  the  ground  that 
the  declaration  did  not  allege  the  transaction  and  consideration  upon 
which  the  note  was  given.  The  court  gave  judgment  for  the  plain- 
tiff, saying:  "  The  very  point  was  settled  in  Greeny.  Long  (April 
Term,  1798),  in  conformity  to  the  adjudications  in  Westminster  Hall." 

In  President  v.  Hurtin  it  was  said:  "  The  note  set  forth  is  a  good 
promissory  note  within  the  statute,  though  it  has  no  words  bearer  or 
order.  This  is  the  established  English  law,  and  the  same  rule  is 
recognized  by  this  court." 

In  Ki?nball  v.  Himtington  the  action  was  upon  a  due  bill  in  this 
form:  "Due  Kimball  &  Kenston  three  hundred  and  twenty-five 
dollars  payable  on  demand."  Judge  Nelson  said:  "The  instru- 
ment is  a  promissory  note  within  the  statute.  Neither  the  acknowl- 
edgment of  value  received  or  negotiable  words  are  essential  to  bring 
it  within  the  statute."  (See  also  Carver  v.  Hayes,  47  Me.  257; 
Frafiklin  v.  March,  6  N.  H.  364.) 

No  authority  is  cited  in  the  courts  of  this  State  or  of  iMigland 
holding  that  a  non-negotiable  note  is  not  within  the  terms  of  the 
laws  cited,  and  we  are  of  the  opinion  that  the  language  of  our  statute 
includes  a  note  payable  to  a  person  without  words  of  negotiability. 

The  instrument  sued  upon  being,  therefore,  a  promissory  note 
withm  the  statute  of  this  State,  it  follows  that  it  imports  a  considera- 
tion. By  the  express  terms  of  the  statute  the  sum  of  money  therein 
mentioned  is  declared  to  be  "  due  and  payable  as  therein  expressed." 

'This  statute  is  now  repealed  by  N.  Y.  Neg.  Inst.  L.,  ^  340,  ami  is  replaced 
by  §  320  [184].  —  Ed. 


670  PROMISSORY    NOTES.  [ART.   XVII. 

That  It  is  "  due  and  payable  "  according  to  its  terms  is  the  legal 
conclusion  which  the  court  must  draw  from  the  instrument  itself. 
A  valid  contract  is  thus  declared  to  exist,  and  of  course  a  considera- 
tion must  be  implied.  Hence  "  value  received  "  need  not  appear  on 
the  face  of  the  note,  as  those  words  express  only  what  the  law  implies. 
{Hatch  \.  Trayes,  11  Ad.  &  El.  702;  Hall  v.  Farmer,  5  Denio,  484.) 
The  effect  of  laws  which  make  promissory  notes  negotiable,  or 
which  authorize  actions  of  debt  upon  them,  though  non- negotiable, 
is  to  take  them  out  of  the  comm.on-law  rule  which  requires  that  every 
contract  must  be  shown  by  the  party  who  sues  upon  it,  to  be  sup- 
ported by  a  consideration,  and  enables  the  holder  to  maintain  an 
action  thereon  without  alleging  or  proving  a  consideration.  In  other 
words,  a  consideration  is  implied  from  the  character  of  the  instru- 
ment. [Fcaslcy  \.  Boaiwright,  2  Leigh,  195;  Hatch  v.  Trayes,  supra.) 
The  English  statute  was  enacted  to  settle  the  controversy  that 
prevailed,  whether  under  the  customs  of  merchants  promissory  notes 
were  negotiable.  They  were  thereby  declared  to  be  assignable  or 
indorsable  over  in  the  same  manner  as  inland  bills  of  exchange  were 
according  to  the  customs  of  merchants,  and  holders  were  em- 
powered to  maintain  actions  thereon  in  the  same  manner  as  they 
might  do  upon  any  inland  bill  of  exchange  made  or  drawn  according 
to  the  custom  of  merchants. 

Our  statute  contains  similar  provisions.  Promissory  notes  and 
inland  bills  of  exchange  were,  by  virtue  of  these  laws,  put  upon  an 
equality.  They  were  made  negotiable  if  they  contained  words  of 
negotiability,  but  whether  negotiable  or  not,  and  whether  they 
expressed  value  received  or  not,  it  was  no  longer  necessary  in  actions 
thereon  to  aver  and  prove  consideration. 

Such  was  and  is  the  rule  as  to  inland  bills  of  exchange,  (i  Daniel 
on  Negotiable  Inst.,  §  161;  Ratibitschek  v.  Blank,  80  N.  Y.  479; 
Averetfs  Adin  rs  v.  Booker,  15  Gratt.  163;  Wells  v.  Brigham,  6 
Cush.  6.) 

And  the  same  rule  under  the  statute  was  made  applicable  to 
promissory  notes.  {Townsend  v.  Derby,  3  Metcalf,  t^G^;  Bean  v. 
Carritth,  108  Mass.  242;  Bank  of  Troy  " .  Topping,  9  Wend.  277;  13 
Id.  557;  Chitty  on  Bills  [9th  Am.  ed.],  78-181;  Paine -j.  Nalke,  57 
How.  Pr.  273;  Story  on  Promissory  Notes,  §  51;  3  Kent's  Com. 
77,  78;  I  Parsons  on  Conts.  [6th  ed.],  249;  i  Parsons  on  Bills,  193.) 
The  statute  does  not  require  a  note  to  express  value  received  upon 
its  face,  and  no  definition  of  such  an  instrument  requires  the  expres- 
sion of  that  fact. 

The  note  sued  upon,  although  by  its  terms  payable  after  the  death 
of  the  maker,  was  a  valid  instrument. 


I-  3-]  NOX-XEGOTIABLE   NOTES.  67 1 

A  promissory  note  is  defined  to  be  a  written  engagement  by  one 
person  to  pay  absolutely  and  unconditionally  to  another  person 
therein  named,  or  to  the  bearer,  a  certain  sum  of  money  at  a  speci- 
fied time  or  on  demand.  (Story  on  Prom.  Notes,  §  i ;  Coolidge  v. 
Riiggles,  15  Mass.  387.)  It  must  contain  the  positive  engagement 
of  the  maker  to  pay  at  a  certain  definite  time  and  the  agreement  to 
pay  must  not  depend  on  any  contingency,  but  be  absolute  and  at  all 
events.  Tried  by  this  standard  the  instrument  set  out  in  the  com- 
plaint was  a  valid  promissory  note.  The  fact  that  it  was  pavable 
after  the  death  of  the  maker  did  not  affect  its  character.  (3  Kent's 
Com.  76.) 

It  follows  from  these  views  that  the  motion  to  dismiss  the  com- 
plaint was  properly  denied,  and  there  was  no  error  in  the  charge  of 
the  court. 

The  point  made  by  the  appellant  that  the  court  erred  in  its  charge 
as  to  the  burden  of  proof  on  the  question  of  consideration,  assuming 
that  evidence/;^?  and  ^(^v/ upon  that  question  was  given,  was  not  raised 
at  the  trial.  The  proposition  made  by  the  defendant  at  the  close  of 
the  judge's  charge,  and  the  only  one  to  which  an  exception  appears  in 
the  record,  was  as  follows:  "  In  order  that  there  may  be  no  doubt 
about  our  position  we  ask  the  court  to  charge  the  jury  that  there  has 
been  no  evidence  given  of  consideration,  and  to  direct  a  verdict  for 
the  defendant  upon  that  ground."  The  defendant  having  thus 
squarely  planted  himself  on  the  ground  that  there  was  no  evidence 
of  consideration,  and  asked  the  court  to  direct  a  verdict  in  his  favor, 
cannot  now  claim  that  there  was  evidence  for  the  jury  and  that  he 
was  entitled  to  a  different  instruction  from  that  given. 

The  defendant's  claim  all  through  the  trial  was  that  the  note  did 
not  import  a  consideration,  and  that  the  plaintiff  could  not  recover 
without  proof  of  that  fact,  and  his  motion  to  dismiss  the  complaint 
and  to  direct  a  verdict  in  his  favor,  and  his  exceptions  to  the  charge, 
all  sharply  present  that  question;  but  he  nowhere  claimed  that  he 
had  given  evidence  which,  if  believed  by  the  jury,  overcame  the  pre- 
sumption arising  in  favor  of  the  note.  This  clearly  appears  from  the 
statement  I  have  quoted. 

The  exceptions  to  the  admission  of  evidence  present  no  error,  and 
the  judgment  should  be  affirmed. 

All  concur,  except  Follett,  Ch.  J.,  and  Vann,  J.,  dissenting,  and 

Parker,  J.,  not  voting. 

Judgment  affirmed.' 


'Accord:  Hegeman  v.  Moon,  131  N.  Y.  462.  Contra:  Bristol  v.  Warner,  19 
Conn.  7,  ante,  p.  325;  Currier  v.  Lockiuood,  40  Conn.  349,  ante,  p.  170.  The 
question  as  to  whether  a  non-negotiable  promissory  note  imports  a  considcra- 


672  PROMISSORY   NOTES.  [ART.  XVII. 

§  320  CROMWELL  V.  HEWITT.  [§  184] 

40  New  York,  491.  —  1869. 
Action  against  payee-indorser  of  two  instruments  as  follows:  — 

New  York,  March  22d,  iS6i. 
$75. 

Sixty  days  after  date  I  promise  to  pay  to  Richard  Hewitt  seventy-five  dollars, 
value  received. 

William  Ryan. 
[Indorsed]: 
James  R.  Hewitt, 
Richard  Hewitt. 

Another  of  like  tenor  for  four  months  was  made  and  indorsed  as 
above. 

James  Hewitt  was  orginally  made  a  defendant,  but  the  action  as 
to  him  was  discontinued,  and  this  action  is  against  Richard  Hewitt, 
the  payee-indorser. 

The  plaintiff  testified  that  the  defendant  was  owing  the  plaintiff, 
and  that  it  was  understood  between  them  that  when  these  notes 
were  passed  over  by  him  in  payment,  that  they  were  taken  solely 
upon  his  responsibility,  and  that  he  assured  plaintiff  that  they  should 
be  paid. 

The  action  was  to  charge  defendant  as  guarantor.  No  presenta- 
tion to  the  maker  for  payment  or  notice  of  non-payment  to  Hewitt 
was  shown.  The  court  below  held  the  suit  could  not  be  maintained, 
and  dismissed  the  complaint.     Plaintiff  appeals. 

Mason,  J.  —  This  action  was  brought  to  recover  of  the  defendant 
the  amount  of  two  non-negotiable  notes  of  seventy-five  dollars  each, 
upon  the  following  facts:  One  William  Ryan  made  the  notes  pay- 
able to  defendant  by  name,  and  the  defendant  transferred  the  notes 
to  the  plaintiff  for  value,  and  indorsed  them  over  by  writing  his  name 
upon  the  back.  The  notes  were  not  presented  for  payment  when  they 
fell  due,  nor  was  any  notice  of  non-payment  given  to  the  defendant, 
and  the  only  question  in  the  case  is  whether  the  plaintiffs  are  entitled 
upon  these  facts  to  recover  of  the  defendant  the  amount  of  the 
notes.  The  case  of  Richards'  Exr\.  lVar?-ing^  (i  Keyes  R.  575), 
is  an  authority  in  point,  and  decides  the  very  question  in  favor  of 
the  plaintiff.  The  case  holds  that  the  holder  may  overwrite  the 
indorser's  name  with  a  contract  of  guaranty,  or  as  maker  of  the  note. 

tion  must  turn  upon  a  construction  of   the  statute  governing  promissory  notes. 
Apparently  the  Neg.  Inst.  L.,  §  320  [184]  has  changed  the  law  in  New  York,  as 
the  section  referred  to  includes  only  negotiable  promissory  notes.  —  Ed. 
'  This  was  a  case  of  "  irregular  indorsement." —  Ed. 


II-  !•]  DISTINGUISHED    FROM   BILLS.  Qy-i^ 

That  case  must  be  regarded  as  controlling,  even  should  we  think 
the  reasons  assigned  for  the  decision  unsatisfactory. 

The  judgment  of  the  Supreme  Court  mast  be  reversed  and  a  new 
trial  granted,  with  costs,  to  abide  the  event.* 


11.  Cheeks. 

I.  Check  Distinguished  from  Bill    of  Exchange. 

§  321  HARRISON  V.  NICOLLET  NAT.   BANK.         [§  185] 

41  Minnesota,  488.  — 1889. 

Appeal  by  plaintiff  from  an  order  of  the  District  Court  for  Hen- 
nepin county,  Rea,  J.,  presiding,  sustaining  a  demurrer  to  the  com- 
plaint. The  action  was  to  recover  $20,000  damages  for  that  the 
defendant,  on  April  14,  1888,  and  before  the  maturity  thereof,  did 
"falsely,  wrongfully,  and  maliciously"  cause  to  be  protested  the 
following  instrument,  which  had  been  indorsed  and  forwarded  to 
defendant  for  collection,  thereby  injuring  plaintiff's  credit,  etc.: 

45  Washington  Ave.,  South, 
Harrison,  the  Tailor. 
$199-92  Minneapolis,  Minn.,  Mch.  27,  iSSS. 

On  April  14th  pay  to  the  order  of  E.  Harrison  one  hundred  and  ninety-nine 
92-100  dollars. 

J.  T.  Harrison. 
To  Citizens'  Bank. 

Minneapolis,  Minn. 
No.   2,884. 

'  Accord:  Sweetser  v.  French,  13  Met.  (Mass.)  262;  Prentiss  v.  Daiiiflsou,  5 
Conn.  175;   Castle  V.  Candee,  16  Conn.  223:  Ford  v.  Mitchell,  15  Wis.  304. 

A  payee-indorser  in  blank  of  a  non-negotiable  note  becomes  liable,  not  as 
indorser,  but  if  at  all  as  guarantor.  In  some  States  no  presumption  arises  that 
any  liability  is  undertaken,  the  indorsement  being  treated  simply  as  a  transfer 
or  assignment  of  a  common-law  contract.  Shaffstall  v.  McDaiiiel,  152  Pa.  St. 
598;  Story  V.  Lamb,  52  Mich.  525.  But  evidence  of  the  true  contract  is 
admissible.  {Ibid.)  An  indorsement  of  a  non-negotiable  note  "  waiving  protest  " 
is  an  indication  of  an  intention  toassume»the  liability  of  guarantor.  First  A'.  />'. 
V.  Falkenhan,  94  Calif.  141. 

The  indorser  becomes  liable  only  to  his  immediate  indorsee,  and  not  to  a 
remote  indorsee.  Kendall  \.  Parker,  103  Calif.  319.  Contra:  IVareham  Bank  v. 
Lincoln,  3  Allen  (Mass.),  192  (semble). 

An  irregular  indorser  of  a  non- negotiable  note  is  a  guarantor.  Pichards' 
Ex'ry.  Warring,  I  Keyes  (N.  Y.).  576;  Mc Mullen  v.  Kafferty,  89  N.  Y.  456;  First 
N.  B.  V.  Babcock,  94  Calif.  96;  Orrick  v.  Colston,  7  Gratt.  (Va.)  1S9.  Sec  on  non- 
negotiable  notes.  Story  on  Prom.  Notes,  §§  128-129;  2  Randolph  on  Comm. 
Paper,  §§  655-661.  —Ed. 

NEGOT.   instruments— 43. 


674  CHECKS.  [art.  XVII. 

Mitchell,  J.  —  This  appeal  presents  the  question  whether  a  written 
order  on  a  bank  or  banker  to  pay  a  sum  of  money  at  a  day  subse- 
quent to  its  date,  and  subsequent  to  the  date  of  its  issue,  is  a 
"  check,"  or  a  "  bill  of  exchange,"  and  hence  entitled  to  grace. 
The  question  is  one  which  has  given  rise  to  considerable  discus- 
sion and  some  conflict  of  opinion. 

About  all  the  law  there  is  on  it,  as  well  as  all  the  arguments  on 
each  side,  will  be  found  in  Morse,  Bank  (3d  ed.),  §  381  et  seq.  The 
two  principal  authorities  holding  such  an  instrument  a  check  are  /;/  re 
Brown  (2  Story,  502),  and  Champion  v.  Gordon  (70  Pa.  St.  474).  Both 
of  these  are  entitled  to  great  weight,  but  they  stand  almost  alone; 
the  Supreme  Courts  of  Rhode  Island  {Westminster  Bank  v.  Whcaton, 
4  R.  I.  30),  and  perhaps  of  Tennessee,  being,  so  far  as  we  know,  the 
only  ones  which  have  adopted  the  same  views.'  All  other  courts 
which  have  passed  upon  the  question,  as  well  as  the  text-writers,  have 
almost  uniformly  laid  it  down  that  such  an  instrument  is  a  bill  of 
exchange,  and  that  an  essential  characteristic  of  a  check  is  that  it  is 
payable  on  demand.  This  was  finally  settled,  after  some  conflict  of 
opinion,  in  New  York, —  the  leading  commercial  State  of  the  Union,  — 
in  the  case  of  Bowen  v.  Newell^  several  times  before  the  courts,  5 
Sandf.  326;  2  Duer.  584;  8  N.  Y.  190,  and  13  N.  Y.  290,  64  Am. 
Dec.  550.  (See,  also,  Morrison  v.  Bailey,  5  Ohio  St.  13,  64  Am.  Dec. 
632;  Woodruff  \ .  Merehants  Bank,  25  Wend.  673;  Minium  \.  Fisher, 
4  Cal.  35;  Bradley  v.  Delaplaine,  5  Har.  [Del.]  305;  Georgia  National 
Bank  v.  Hetiderson,  46  Ga.  487  ;  Ivo/y  v.  Bank  of  State  of  Mo.,  36  Mo. 
475,  88  Am.  Dec.  150;  Work  v.  Tatman,  2  Houst.  304;  Ha^uley  v. 
Jette,  10  Or.  31;  2  Daniel  Neg.  Inst.,  §§  i573-i575;  Morse,  Bank., 
supra.') 

Nearly  every  definition  of  a  check  given  in  the  books  is  to  the 
effect  not  only  that  it  must  be  drawn  on  a  bank  or  banker,  but  that 
it  must  be  payable  on  demand,  (i  Rand.  Com.  Paper,  §  8;  Byles, 
Bills,  13;  2  Daniel,  Neg.  Inst.,  §  1566;  i  Edw.  Bills,  §  19;  Bigelow, 
Bills  and  N.  116;  Chalm.  Dig.  Bills  and  N.,  art.  254;  Shaw,  Ch.  J., 
in  Bullard  v.  Randall,  i  Gray,  605;  Bouv.  Law  Diet.;  Burrill,  Law 
Diet.)  Occasionally  the  expression  is  used  "payable  on  presenta- 
tion," but  evidently  —  except  perhaps  in  Story  on  Bills  —  as  synony- 
mous with  "  payable  on  demand." 

As  the  question  is  a  new  one  in  this  State,  we  would  not  feel  com- 
pelled to  follow  the  majority  if  the  better  reasons  were  with  the 
minority.  Perhaps  the  weightiest  argument  in  favor  of  holding  such 
an  instrument  a  check  is  the  practical  one  advanced  by  Sharswood,  J., 

'  See  also  IVav  v.   Towlc,  155  Mass.  374.  —  Ed. 


n.  I.]  DISTINGUISHED    FROM    BILLS.  675 

in  Champion  v.  Gordon,  supra,  viz.,  that  if  held  to  be  a  bill  of  exchange 
the  holder  might  immediately  present  it  for  acceptance,  and  if  not 
accepted  he  could  sue  the  drawer,  or  if  accepted  it  would  tie  up  the 
drawer's  funds  in  the  hands  of  the  bank,  and  thus,  in  either  case,  frus- 
trate the  very  object  of  making  it  payable  at  a  future  day.  In  answer 
to  this,  it  may  be  said  that  the  drawer,  if  he  wished,  could  very  easily 
avoid  such  consequences  by  inserting  appropriate  provisions  in  the 
instrument.  On  the  other  hand,  if  we  hold  that  an  instrument  not  pay- 
able on  demand  may  be  a  check,  we  are  left  without  any  definite  or 
precise  rule  by  which  to  determine  when  the  paper  is  a  check,  and 
when  a  bill  of  exchange.  The  fact  that  it  is  drawn  on  a  bank  is  not 
alone  enough  to  distinguish  a  check  from  a  bill  of  exchange,  for 
nothing  is  better  settled  than  that  a  bill  of  exchange  may  be  drawn 
on  a  banker.  Neither  will  the  fact  that  the  maker  writes  it  on  a 
"  blank  check  "  be  any  test,  for  the  kind  t)f  paper  it  is  written  on 
cannot  control  the  import  and  legal  effect  of  its  words.  Neither  can 
the  question  whether  it  is  drawn  against  a  previous  deposit  of  funds 
by  the  drawer  with  the  drawee  furnish  any  criterion,  for  nothing  is 
clearer  than  that  a  bill  of  exchange,  as  well  as  a  check,  can  be  drawn 
against  such  a  deposit,  and  that  an  instrument  may  be  a  check 
although  the  drawer  has  no  funds  in  the  hands  of  the  drawee. 
Neither  will  it  do  to  say  that  if  it  is  entitled  to  grace  it  is  a  bill,  but 
if  not  entitled  to  grace  it  is  a  check,  because  the  legal  character  of 
the  instrument  has  first  to  be  determined  before  it  can  be  known 
whether  or  not  it  is  entitled  to  grace.  In  short,  if  we  omit  from  the 
definition  of  a  check  the  element  of  its  being  payable  on  demand, 
bankers  and  business  men  are  left  without  any  definite  rule  by 
which  to  govern  their  action  in  a  matter  where  simplicity  and  pre- 
cision of  rule  are  especially  desirable.  It  might  be  expedient  to 
enact,  as  has  been  done  in  New  York  and  some  other  States,  that  all 
checks,  bills  of  exchange,  or  drafts,  appearing  on  their  face  to  be 
drawn  on  a  bank  or  banker,  whether  payable  on  a  specified  day  or 
any  number  of  days  after  date  or  sight,  shall  be  payable  on  the  day 
named  in  the  instrument  without  grace;  or,  what  might  be  better 
still,  to  abolish  days  of  grace  altogether  as  a  usage  which  has 
already  long  outlived  the  condition  of  things  out  of  which  it  had  its 
origin.  But  this  is  a  matter  for  legislatures  and  not  for  courts.  We 
are  therefore  of  opinion  that  the  better  rule  is  to  hold  that  such  an 
instrument  is  a  bill  of  exchange,  and  hence  entitled  to  grace.  We 
may  add  that  it  is  always  desirable  that  the  decisions  of  the  courts 
should  be  in  accord  with  the  business  usages  and  customs  of  the 
country.  Such  usages  are  entitled  to  special  weight  on  a  question 
like  this,  for  the  whole  matter  of  grace  on  bills  and  notes  had  its 


676  CHECKS.  [ART.  XVII. 

origin  in  the  usage  of  bankers.  And,  so  far  as  we  are  advised,  the 
general  practice  of  bankers  in  this  State  has  been  to  treat  instru- 
ments like  this  as  bills  of  exchange  and  not  checks. 

Counsel  for  respondent  suggests  that,  even  if  we  hold  that  pay- 
ment of  this  paper  was  demanded  and  protest  made  prematurely,  yet 
the  action  of  the  court  below  in  sustaining  the  demurrer  to  the  com- 
plaint should  be  affirmed  on  other  grounds,  viz.,  that  the  act  of  pro- 
testing, etc.,  was  the  act  of  the  notary  and  not  of  the  bank;  that 
the  protest  could  not  have  damaged  the  financial  standing  of  the 
plaintiff  because  the  certificate  of  the  notary  shows  on  its  face  that 
it  was  done  before  maturity;  also,  that  the  instrument,  being  of 
doubtful  classification,  involving  a  legal  question  on  which  courts 
differed,  the  defendant  would  not  be  liable  for  an  honest  mistake  of 
law.  Whatever  force  there  might  be  in  these  suggestions,  either  by 
way  of  defence  or  in  mitigation,  we  think  they  are  unavailing  in  sup- 
port of  a  demurrer  to  a  complaint  which  alleges  that  the  defendant 
"  falsely,  wrongfully  and  maliciously  caused  "  the  paper  to  be  pro- 
tested for  non-payment,  and  notices  of  protest  sent  out,  and  which 
also  shows  that  such  notices  —  which  were  presumably  what,  if  any- 
thing, injured  plaintiff's  standing  and  credit  —  contained  nothing 
indicating  that  payment  was  prematurely  demanded. 

Order  reversed.' 


2.  Presentment:    Effect  of  Delay  Upon  Drawer's  Liability. 

§  322  GRANGE  V.   REIGH.  [§  186] 

93  Wisconsin,  552.  —  1896. 

Action  against  the  drawers  of  a  check.  Defendants,  after  bank- 
ing hours  on  July  20,  drew  and  delivered  to  plaintiff  in  Milwaukee, 
where  plaintiff  resided,  a  check  for  $1,211  upon  the  South  Side 
Savings  Bank,  located  in  Milwaukee.  The  check  was  not  presented 
on  July  21,  during  all  of  which  day  the  bank  was  open  and  would 
have  paid  the  check  had  it  been  presented.  The  bank  did  not  open 
after  July  21,  by  reason  of  which  the  check  was  not  paid.  Judg- 
ment for  defendants. 

Marshall,  J.— The  settled  law  applicable  to  the  facts  of  this 
case  is  that,  if  a  person  receives  a  check  on  a  bank,  he  must  present 


'  A  post-dated  check  is  to  be  distinguished  (outside  of  Mass.,  Pa.,  and  R.  I.), 
from  a  check  payable  by  its  terms  after  the  date  of  issue.  2  Daniels,  §§  1577- 
1578;  Crawford  V.  West  Side  Bank,  100  N.  Y.  56.  A  post-dated  check  is  to  be 
treated  as  if  issued  on  the  day  of  its  date.  Frazier  v.  Trow's,  Printing,  &'c.,  Co., 
24  Hun,  281,  90  N.  Y.  678.  —  Ed. 


II.  2.]  PRESENTMENT.  ^JJ 

it  for  payment  within  a  reasonable  time,  in  order  to  preserve  his 
right  of  recourse  on  the  drawer  in  case  of  non-payment  by  the 
drawee;  and  that,  when  such  person  resides  and  receives  the  check 
at  the  same  place  where  such  bank  is  located,  a  reasonable  time  for 
such  presentation  reaches,  at  the  latest,  only  to  the  close  of  banking 
hours  on  the  succeeding  day,  excluding  Sundays  and  holidays. 
(Tiedeman,  Com.  Paper,  §  443;  2  Daniel,  Neg.  Inst.,  §§  1590,  1591, 
and  cases  cited;  Lloyd  v.  Osborne,  92  "Wis.  93.)  Plaintiff  failed  to 
comply  with  the  law  in  this  respect;  hence  defendants  were  dis- 
charged from  all  liability  to  answer  for  the  default  of  the  bank. 
Such  was  the  decision  of  the  trial  court,  and  it  must  be  affirmed. 

By  the  Court.  —  Judgment  affirmed.' 


§  322  GREGG  V.  BEANE.  [§  186] 

69  Vermont,  22.  —  1895. 

General  assumpsit  by  the  firm  of  Gregg  &  Co.,  against  J.  H. 
Beane.  Defendant  pleaded  the  general  issue,  payment,  and  notice 
of  special  matter.  There  was  a  trial  by  the  court.  Plaintiffs  had 
judgment,  and  defendant  excepts.     Reversed. 

MuNSON,  J.  — The  plaintiffs  claim  to  recover  the  amount  of  a  check 
drawn  in  their  favor  by  the  defendant  on  S.  M.  Dorr's  Sons,  private 
bankers  at  Bristol,  Vt.,  and  mailed  them  in  payment  of  an  indebted- 
ness. The  check  was  received  by  the  plaintiffs  at  their  place  of 
business  in  Trumansburg,  N.  Y.,  on  the  9th  of  August,  and  was  for- 

'  But  delay  which  occasions  no  loss  to  the  drawer  will  not  discharge  the 
drawer;  in  this  respect  a  check  differs  materially  from  a  bill  of  exchange. 
Syracuse,  etc.,  R.  R.  v.  Collins,  57  N.  Y.  641;  WooJin  v.  Frazee,  38  N.  Y.  Super. 
Ct.  190;  Cogswell  V.  Savings  Bank,  59  N.  H.  43;  Bull  v.  Bank,  123  U.  S.  105; 
2  Morse  on  Banks,  §  421;  2  Daniel  on  Neg.  Inst.,  §  1587. 

A  banker's  draft,  that  is  a  check  or  draft  by  one  bank  upon  another,  need  not 
be  presented  with  the  same  promptitude  as  the  check  of  an  individual;  it  is 
intended  to  circulate  for  a  limited  period.  Bull  v.  Bank,  123  U.  S.  105; 
2  Daniel,  |  I595«. 

The  rule  of  diligence  as  to  notice  of  dishonor  and  the  rules  as  to  excuses  for 
delay,  etc.,  are  the  same  as  in  the  case  of  bills  and  notes.  2  Daniel,  ^Ji  i59<J- 
1598;  2  Morse,  §  428. 

An  indorserof  a  check  is  entitled  to  due  presentment  and  notice,  and  the  ques- 
tion as  to  whether  he  is  injured  by  the  delay  seems  immaterial.  Afinniy  v. 
Judak,  6  Cow.  (N.  Y.)  484;  Mohawk  Bank  v.  Brodoick,  10  Wend.  (N.  Y.)  304; 
Kirkpatrick  v.  Puryear,  93  Tenn.  409;  2  Morse  on  Banks.  ^  422.  The  same 
rules  of  diligence  apply  as  in  the  case  of  the  drawer.  Gifford  v.  Uardell,  88 
Wis.  538;  Smith  v.  Janes,  20  Wend.  (N.  Y.)  192;  Carroll  v.  Sweet,  128  N.  Y. 
19.  —En. 


678  CHECKS,  [art.   XVII. 

warded  on  the  same  day  to  the  First  National  Bank  of  Ithaca,  N.  Y., 
for  collection.  On  the  loth  of  August  the  Bank  at  Ithaca  mailed 
the  check  for  collection  to  its  reserve  agent,  the  Fourth  National 
Bank  of  New  York  city.  This  bank  received  it  on  the  nth  of 
August,  and  on  the  12th  mailed  it  for  collection  to  the  Merchants' 
National  Bank  of  Burlington,  one  of  the  banks  through  which  it 
made  its  collections  in  Vermont.  The  13th  was  Sunday.  The 
Burlington  bank  received  the  check  on  the  morning  of  the  14th,  at 
an  hour  which  did  not  permit  of  its  being  sent  to  Bristol  by  the 
morning  mail  of  that  day.  The  banking  house  of  S.  M.  Dorr's  Sons 
closed  its  doors  on  the  14th,  at  10  o'clock  in  the  forenoon. 

It  is  found  that  24  hours  is  required  for  the  transmission  of  mail  be- 
tween Trumansburg  and  Bristol ;  and,  in  the  absence  of  any  statement 
as  to  the  hours  of  departure  and  arrival,  it  must  be  assumed  from  this 
general  finding  that  a  letter  mailed  in  Trumansburg  to  a  corrres- 
pondent  in  Bristol  would  be  received  on  the  following  day.  There 
is  no  special  finding  in  regard  to  mails  from  Ithaca,  but  it  is  evident 
from  its  location  and  connections  that  it  is  within  the  facts  found  in 
regard  to  Trumansburg.  It  appears  then  that,  if  the  Ithaca  bank 
had  mailed  the  check  directly  to  some  one  in  Bristol,  it  would  have 
been  received  on  the  nth,  and  would  have  been  presented  by  the 
1 2th,  and  paid.  No  claim  inconsistent  with  this  view  is  made  in 
argument. 

It  is  found  that,  in  collecting  a  check  in  the  usual  way,  the  payee 
deposits  it  in  a  local  bank,  and  that  the  local  bank  sends  it  to  its 
reserve  bank  in  Boston,  New  York,  Albany,  or  Troy,  and  that  the 
reserve  bank  sends  it  to  its  correspondent  bank  nearest  the  bank  on 
which  the  check  is  drawn,  and  that  the  correspondent  bank  sends 
it  to  the  drawee.  It  is  found,  however,  that  in  some  cases  a  reserve 
bank  receiving  a  check  for  collection  sends  it  directly  to  the  bank 
on  which  it  is  drawn;  but  it  is  also  found  that,  if  this  course  had 
been  pursued  in  the  present  instance,  the  check  would  not  have 
reached  Bristol  in  due  course  of  mail  until  after  the  suspension.  It 
is  further  found  that,  in  collecting  this  check,  the  plaintiffs  pursued 
the  usual  and  ordinary  course,  and  that  there  was  not  in  that  course 
any  unusual  or  unnecessary  delay. 

The  plaintiffs  claim  that  the  finding  of  the  court  below  that  this 
check  was  forwarded  for  collection  in  the  usual  way  is  conclusive 
upon  the  question  of  diligence.  But  this  cannot  be  so,  unless  it  be 
considered  that  any  change  of  method  which  grows  into  a  settled 
practice  of  itself  works  a  modification  of  the  law.  It  can  hardly  be 
claimed  that  custom  is  so  exclusively  the  test  of  diligence  that  the 
adoption  of  a  particular  practice  by  any  class  of  business  men  leaves 


II-  2.J  PRESEXT.MEXT 


679 


nothing  for  the  determination  of  the  court.  When  the  custom  of 
one  period  has  resulted  in  the  adoption  of  a  definite  legal  rule,  the 
development  of  a  new  custom  will  not  effect  a  modification  of  the 
rule  in  advance  of  judicial  sanction.  The  case  shows  the  manner  in 
which  this  check  was  forwarded  for  presentment,  and,  when  the 
facts  are  found,  due  diligence  is  a  question  of  law. 

The  rule,  in  its  most  general  statement,  requires  the  payee  of  a 
check  to  present  it  for  payment  with  reasonable  diligence.  But  the 
law  goes  further  than  this  general  statement,  and  determines  what 
reasonable  diligence  is  under  ordinary  circumstances.  When  the  case 
presents  only  the  simple  facts  of  time,  location,  and  stated  means  of 
communication,  the  question  of  liability  is  to  be  determined  by  an  ap- 
plication of  the  more  definite  rule.  It  is  only  when  the  case  presents 
special  circumstances  which  are  claimed  to  warrant  further  delay  that 
the  court  is  left  without  other  guidance  than  the  general  require- 
ment. This  case  discloses  nothing  in  the  nature  of  an  excuse  for 
delay. 

It  is  well  settled  that  a  check  must  be  presented  to  the  bank  on 
which  it  is  drawn  if  the  bank  be  in  the  same  place  with  the  holder, 
or  forwarded  by  mail  if  the  bank  be  in  another  place,  by  the  ne.\t 
secular  day  after  it  is  received,  and  that  the  depositing  of  the  check 
in  a  local  bank  for  collection  does  not  give  the  holder  the  benefit  of 
an  additional  day.  So  this  check  was  forwarded  neither  earlier  nor 
later  than  the  law  required;  and  the  controversy  is  confined  to  the 
question  whether  it  was  forwarded  in  the  proper  manner. 

As  presented  by  the  findings,  the  question  is  whether  the  local 
bank  was  justified  in  forwarding  the  check  through  its  New  York 
correspondent.  The  defendant  sustained  no  harm  from  the  course 
taken  by  the  New  York  bank  in  sending  it  to  Burlington.  It  is  said 
in  Daniel  on  Negotiable  Instruments  (i<  1592)  that,  when  the  payee 
receives  a  check  from  the  drawer  in  a  place  distant  from  the  place 
where  the  bank  on  which  it  is  drawn  is  located,  it  will  be  sufficient 
if  he  forward  it  by  post  to  some  person  in  the  latter  place  on  the 
next  secular  day  after  it  is  received,  and  if  the  person  to  whom  it  is 
thus  forwarded  present  it  for  payment  on  the  day  after  it  has 
reached  him  by  due  course  of  mail.  If  this  be  accepted  as  a  correct 
statement  of  the  rule,  it  would  seem  not  to  permit  the  collection 
through  a  correspondent  so  remote  as  to  delay  the  presentment  a 
day  beyond  the  time  so  allowed.  It  is  true  that  the  rule  is  some- 
times stated  to  be  that  the  check  should  be  forwarded  for  presenta- 
tion on  the  day  after  it  is  received,  and  that  the  agent  to  whom  it 
is  forwarded  must  in  like  manner  present  it,  or  forward  it,  on  the 
day   after  he   receives  it.     This  phraseology  might   seem   to  con- 


680  CHECKS.  [art.  XVII. 

template  the  collection  of  a  check  by  means  of  several  agents.  But 
statements  regarding  the  forwarding  of  a  check  by  successive  holders 
will  ordinarily  be  found  to  refer  to  checks  drawn  for  the  purpose  of 
being  put  in  circulation,  or  to  questions  arising  between  indorser 
and  indorsee  where  a  check  given  in  payment  has  been  diverted  from 
its  proper  use.  Statements  applicable  to  such  cases  must  not  be 
taken  to  indicate  that  the  requirement  of  diligence,  as  between  payee 
and  drawer,  will  be  satisfied  by  a  regular  transmission  upon  succes- 
sive days,  if  an  improper  number  of  agents  be  employed. 

The  rule  is  ordinarily  stated  to  be  that  the  payee  or  the  local  bank 
receiving  it  for  collection  must  forward  it  directly  to  the  place  of 
payment.  It  is  said  in  Byles  on  Bills  that  the  bank  receiving  it  for 
collection  cannot  postpone  the  time  of  presentment  by  circulating  it 
through  agents  or  branches  of  the  bank.  In  Moule  v.  Brown  (4 
Bing.  N.  C.  266),  the  right  of  a  branch  office  of  the  plaintiff  bank  to 
send  through  the  home  office,  in  accordance  with  the  custom  of  the 
bank,  was  considered  and  denied. 

We  do  not  find  that  any  modification  of  the  rule  as  before  stated  has 
been  recognized  in  recent  cases.  In  Bank  v.  Aliller  (37  Neb.  500,  40 
Am.  St.  R.  499,  55  N.  W.  1064),'  the  question  was  as  to  the  liability  of 
the  payee  on  his  indorsement  to  the  bank.  The  check  was  deposited 
on  Saturday,  the  31st  day  of  May,  and  was  drawn  on  a  bank  located  at 
Courtland,  27  miles  distant  from  the  bank  of  deposit,  and  accessible 
by  two  daily  mails.  On  receiving  the  check,  the  Bank  of  Wymore 
mailed  it  to  a  bank  in  St.  Joseph,  Mo.,  for  collection,  and  this 
bank  mailed  it  to  a  bank  in  Omaha  for  collection,  and  the  latter 
bank  mailed  it  to  the  bank  on  which  it  was  drawn.  The  court  said 
the  evidence  did  not  show  that  this  method  of  presentment  was  in 
accordance  with  any  custom  of  bankers,  but  said,  further,  that,  if 
such  a  custom  had  been  shown,  it  would  not  have  relieved  the  bank 
from  liability.  Without  undertaking  to  lay  down  any  general  rule, 
the  court  said  that,  in  this  case,  Tuesday,  June  3d,  would  have  been 
a  reasonable  time  within  which  to  make  presentment.  This  was  in 
accordance  with  the  rule  as  stated  by  Daniel. 

In  Giffordv.  ^«r^^// (88  Wis.  538,  43  Am.  St.  R.  925,  60  N.  W.  1064), 
a  check  indorsed  by  the  defendant  was  delivered  to  the  plaintiff's  agent 
at  Dousman  on  July  17th,  and  was  at  once  mailed  to  the  plaintiff  at 
New  Richmond,  who  received  it  on  the  18th,  and  at  once  delivered 
it  to  a  local  bank  for  collection.  This  bank  had  no  correspondent  in 
Milwaukee,  and  immediately  mailed  the  check  to  its  correspondent 
in  Chicago.  From  Chicago  it  was  forwarded  to  Milwaukee,  and  pre- 
sented on  the  2ist.     If  the  check  had  been  sent  directly  to  Milwaukee 

'  Affirmed  on  rehearing,  43  Neb.  791.  —  Ed. 


II-  2.]  PRESENTMENT.  68 1 

from  New  Richmond,  it  would  have  arrived  in  time  for  presentation 
on  the  2oth,  and  would  have  been  paid.  The  trial  court  held  that  send- 
ing the  check  for  collection  by  way  of  Chicago  was  not  reasonably 
diligent,  and  directed  a  verdict  for  defendant.  On  appeal  the  judg- 
ment was  sustained,  the  court  saying  that,  when  the  defendant  deliv- 
ered the  check  at  Dousman,  he  had  a  right  to  e.xpect  that  the  plaintiff 
or  his  agent  would  present  it  for  payment  within  a  reasonable  time, 
instead  of  which  it  was  sent  to  New  Richmond,  several  hundred  miles 
northwest  of  Milwaukee,  and  then  sent  back  through  Milwaukee  to 
Chicago,  and  from  there  returned  to  Milwaukee.  The  court  then 
stated  how  a  check  should  be  forwarded  and  presented  in  such  cases, 
its  rule  corresponding  to  that  given  by  Daniel.  The  rule  is  simi- 
larly stated  in  Holmes  v.  Roe  (62  Mich.  199,  28  N.  W.  S64.) 

In  First  National  Bank  of  Graf  ton  v.  Biickhannon  Bank  (80  Md.  475, 
31  Atl.  302),  the  plaintiff  bank,  located  at  Grafton,  W.  Va.,  received 
on  the  i2th  of  January,  in  payment  of  a  balance  due  it,  a  check  on 
J.  J.  Nicholson  &  Sons,  of  Baltimore,  and  on  the  same  day  forwarded  it 
for  collection  to  its  correspondent  bank  in  Philadelphia.  The  Phila- 
delphia bank  received  it  on  the  13th,  and  at  once  mailed  it  to  its 
correspondent  bank  in  Baltimore.  This  bank  received  it  on  the 
14th,  and  presented  it  to  the  drawee  on  the  same  day.  The  court 
sustained  this  presentment,  on  the  ground  that  the  Grafton  bank, 
having  sent  out  the  check  one  day  sooner  than  was  necessary,  had 
it  in  Baltimore  for  presentment  on  the  day  required,  notwithstand- 
ing its  transmission  through  Philadelphia. 

We  think  that  if  this  rule  of  commercial  law,  stated  in  the  various 
text-books,  and  affirmed  by  these  recent  cases,  is  to  be  modified  in 
derogation  of  the  rights  of  drawers  of  checks,  it  should  be  done  by 
legislative  enactment.' 

Judgment  reversed,  and  judgment  for  defendant.^ 

'Laws  of  Vt.,  1896,  No.  38:  "  In  order  to  hold  the  maker,  endorser,  guar- 
antor, or  surety  of  any  check  or  draft  deposited  with  or  forwarded  to  any  indi- 
vidual or  bank  for  collection,  or  owned  by  any  individual  or  bank,  it  shall  be 
sufficient  for  said  individual  or  bank  to  forward  the  same  in  the  usual  commer- 
cial way  now  in  use,  according  to  the  regular  course  of  business,  and  the  same 
shall  be  considered  due  diligence  in  the  collection  of  such  check  ordraft."  —  Kd. 

"^  There  is  some  authority  for  the  proposition  that  the  usual  or  customary 
method  of  forwarding  may  be  safely  used,  even  though  it  is  circuitous. 
Wallace  v.  Agry,  4  Mason  (U.  S.)  336;  5  lb.  118;  Smith  v.  Janes,  20  Wend. 
(N.  Y.)  193;    Taylor  v.  Sip,  30  N.  J.  L.  284,  291.  —  Eu. 


682  CHECKS.  [ART.  XVII. 

3.  Certification:  Effect  upon  Drawer's  Liability. 

§  324  MINOT  V.  RUSS.  [§  188] 

HEAD  V.   HORNBLOWER. 

156  Massachusetts,  45S.  —  iSg2. 

Field,  C.  J.  —The  first  case  is  an  appeal  from  a  judgment  ren- 
dered by  the  Superior  Court  for  the  defendant,  on  his  demurrer  to 
the  declaration.  The  defendant,  on  October  29,  1891,  drew  a  check 
on  the  Maverick  National  Bank,  payable  to  the  order  of  the  plaintiff, 
and,  being  informed  by  the  plaintiff  that  the  check  must  be  certified 
by  the  bank  before  it  would  be  received,  the  defendant  on  the  same 
day  presented  the  check  to  the  bank  for  certification,  and  the  bank 
certified  it  by  writing  on  the  face  of  the  check  the  following: 
"  Maverick  National  Bank.  Pay  only  through  Clearing-House.  J. 
W.  Work,  Cashier.  A.  C.  J.,  Paying  Teller."  After  it  was  certi- 
fied, the  check  was,  on  Saturday,  Oct.  31,  1891,  delivered  by  defend- 
ant to  the  plaintiffs,  for  a  valuable  consideration.  The  declaration 
alleges  that  the  bank  stopped  payment  on  Monday  morning,  Novem- 
ber 2,  1891,  "  before  the  commencement  of  business  hours  on  that 
day,"  and  that  on  that  day  payment  was  duly  demanded  of  the  bank, 
and  notice  of  non-payment  was  duly  given  to  the  defendant. 

The  second  case  is  an  appeal  from  a  judgment  rendered  for  the 
defendants  by  the  Superior  Court,  on  an  agreed  statement  of  facts. 
On  Saturday,  October  31,  1891,  the  defendants  drew  their  check  on 
the  Maverick  National  Bank,  payable  to  the  order  of  the  plaintiffs, 
and  delivered  it  to  them  in  payment  of  stocks  bought  by  the  defend- 
ants of  the  plaintiffs.  The  check  was  received  too  late  to  be 
deposited  by  the  plaintiffs  for  collection  in  season  to  be  carried  to 
the  clearing-house  on  that  day,  but  during  banking  hours  on  that 
day  the  plaintiffs  presented  the  check  to  the  Maverick  National  Bank 
for  certification,  and  the  bank  certified  it  by  writing  or  stamping  on 
its  face  the  following:     "  Maverick  National  Bank.     Certified.     Pay 

only  through   Clearing-House.     C.   C.    Domett,    A.  Cashier.     , 

Paying  Teller." 

At  that  time  the  defendants  had  on  deposit  sufficient  funds  to  pay 
the  check,  and  the  bank  on  certification  charged  to  the  defendants' 
account  the  amount  of  the  check,  and  credited  it  to  a  ledger  account 
called  certified  checks,  in  accordance  with  their  uniform  custom. 
After  certification,  the  plaintiffs,  on  the  same  day,  deposited  the 
check  in  the  Hamilton  National  Bank  for  collection.  It  is  agreed 
that  if  the  check  had  been  presented  for  payment  on  Saturday,  in 
banking  hours,  it  would  have  been  paid;  but  the  Maverick  National 


II.  3-]  drawer's   CONTRACT:    CERTIFICATION.  683 

Bank  transacted  no  business  after  Saturday,  and  on  Sunday  the 
Comptroller  of  the  Currency  placed  a  national  bank  examiner  in 
charge,  and  the  bank  was  put  into  the  hands  of  a  receiver.  The 
clearing-house  on  November  2  refused  to  receive  checks  on  the 
Maverick  National  Bank,  and  the  check  was  on  that  day  duly  pre- 
sented for  payment,  and  due  notice  of  non-payment  was  given  to  the 
defendants. 

Each  of  the  checks  was  in  the  ordinary  form  of  check  on  a  bank, 
and  was  payable  on  demand,  and  no  presentment  for  acceptance  or 
certification  was  necessary.  In  a  sense,  undoubtedly,  a  check  is  a 
species  of  bill  of  exchange,  and  in  a  sense  also  it  is  a  distinct  com- 
mercial instrument;  but  according  to  the  general  understanding  of 
merchants,  and  according  to  our  statutes,  these  instruments  were 
checks,  and  not  bill  of  exchange.  "  A  check  is  an  order  to  pay  the 
holder  a  sum  of  money  at  the  bank,  on  presentment  of  the  check 
and  demand  of  the  money;  no  previous  notice  is  necessary,  no 
acceptance  is  required  or  expected,  it  has  no  days  of  grace.  It  is 
payable  on  presentment  and  not  before."  (^Ballard  v.  Randall,  i 
Gray,  605,  606.)  The  duty  of  the  bank  was  to  pay  these  checks 
when  they  were  presented  for  payment,  if  the  drawers  had  sufficient 
funds  on  deposit.  The  bank  owed  no  duty  to  the  drawers  to  certify 
the  checks,  although  it  could  certify  them  if  it  saw  fit,  at  the  request 
of  either  the  drawers  or  the  holders,  and  if  it  certified  them  it 
became  bound  directly  to  the  holders,  or  to  the  persons  who  should 
become  the  holders.  In  either  case,  the  bank  would  charge  to  the 
account  of  the  drawer  the  amount  of  the  check,  because  by  certifi- 
cation it  had  become  absolutely  liable  to  pay  the  check  when  pre- 
sented. When  a  check  payable  to  another  person  than  the  drawer 
is  presented  by  the  drawer  to  the  bank  for  certification,  the  bank 
knows  that  it  has  not  been  negotiated,  and  that  it  is  not  presented 
for  payment,  but  that  the  drawer  wishes  the  obligation  of  the  bank 
to  pay  it  to  the  holder  when  it  is  negotiated,  in  addition  to  his  own 
obligation.  But  when  the  payee  or  holder  of  a  check  presents  it  for 
certification,  the  bank  knows  that  this  is  done  for  the  convenience 
or  security  of  the  holder.  The  holder  could  demand  payment  if  he 
chose,  and  it  is  only  because,  instead  of  payment,  the  holder  desires 
certification,  that  the  bank  certifies  the  check  instead  of  paying 
it.  In  one  case  the  bank  certifies  the  check  for  the  use  or  con- 
venience of  the  drawer,  and  in  the  other  for  the  use  or  convenience 
of  the  holder.  In  the  present  cases  the  checks  were  seas()nai)Iy  pre- 
sented to  the  bank  for  payment,  and  on  the  facts  stated  the  (Uifend- 
ants  would  be  liable  unless  the  certification  discharged  tiiem  from 
liability. 


684  CHECKS.  [art.  XVII. 

It  is  argued  that  the  certification  of  a  check,  whereby  the  bank 
becomes  absolutely  liable  to  pay  it  at  any  time  on  demand,  discharges 
the  drawer,  because  it  is  said  that  the  check  then  becomes  in  effect  a 
certificate  of  deposit;  and  it  is  also  argued  that  the  certification  is 
in  effect  only  an  acceptance  of  a  bill  of  exchange,  and  that  if  pay- 
ment is  duly  demanded  of  the  bank  and  refused,  and  notice  of  non- 
payment duly  given,  the  drawer  is  held.  So  far  as  the  question  has 
been  considered,  it  has  been  decided  that  the  certification  of  a  bank 
check  is  not,  in  all  respects,  like  the  making  of  a  certificate  of 
deposit,  or  the  acceptance  of  a  bill  of  exchange,  but  that  it  is  a  thing 
sui generis,  and  that  the  effect  of  it  depends  upon  the  person  who,  in 
his  own  behalf,  or  for  his  own  benefit,  induces  the  bank  to  certify 
the  check.  The  weight  of  authority  is,  that  if  the  drawer  in  his 
own  behalf,  or  for  his  own  benefit,  gets  his  check  certified,  and  then 
delivers  it  to  the  payee,  the  drawer  is  not  discharged;  but  that  if 
the  payee  or  holder,  in  his  own  behalf  or  for  his  own  benefit,  gets  it 
certified  instead  of  getting  it  paid,  then  the  drawer  is  discharged. 
{^Boni  V.  First  National  Bank,  123  Ind.  78;  Rounds  y .  Smith,  42  111. 
245  ;  Brown  v.  Lcckie,  43  111.  497  ;  Andrezvs  v.  German  National  Bank, 
9  Heisk.  211;  First  National  Bank  V.  Leach,  52  N.  Y.  350;  Boyd  v. 
Nasmith,  17  Ont.  40;  Fssex  County  Bank  v.  Bank  of  Montreal,  7  Biss. 
193;  First  National  Bank  \ .  Whitman,  94  U.  S.  343,  345;  Afetropoli- 
tan  National  Bank  v.  Jones,  27  N.  E.  Rep.  533;  Continental  National 
Bank  V.  Cortihauser,  37  111.  App.  475;  National  Commercial  Bank  v. 
Miller,  77  Ala.  16S;  Larsen  \ .  Breene,  12  Col.  480;  Mutual  N^ational 
Bank  V.  Rotge,  28  La.  An.  933;  Morse  on  Banking,  §§  414,  415.)  We 
are  of  opinion  that  this  view  of  the  law  rests  on  sound  reasons.  If 
it  be  true  that  the  existing  methods  of  doing  business  make  the  use 
of  certified  checks  necessary,  the  persons  who  receive  them  can 
always  require  them  to  be  certified  before  delivery.  If  they  receive 
them  uncertified  and  then  present  them  to  the  bank  for  certification 
instead  of  payment,  the  certification  should  be  considered  as  dis- 
charging the  drawer. 

It  may  also  be  said,  that  in  the  second  case  the  certification 
amounted  to  an  extension  of  the  time  of  payment  at  the  request  of 
the  payees,  without  the  consent  of  the  drawers.  Before  the  certifi- 
cation the  drawers  could  have  requested  the  payees  to  present  the 
check  for  payment  on  Saturday,  or  could  themselves  have  drawn 
out  the  money  and  paid  the  check.  After  certification  the  amount 
of  the  check  no  longer  stood  to  the  credit  of  the  drawers,  and  the 
payees  had  accepted  an  obligation  of  the  bank  to  pay  only  through 
the  clearing-house,  which  could  not  happen  before  the  following 
Monday. 


II- 4-]  drawee's  liability  to  holder.  685 

The  result  is  that  in  the  first  case  the  judgment  is  reversed,  and 
the  demurrer  overruled,  and  in  the  second  case  the  judgment  is 
affirmed. 

So  ordered.' 


4.   Drawee   not  Liable  to  Holder:  a  Check  is  not  an  Assign- 
ment OF  Funds. 

§  325  BANK  OF  THE  REPUBLIC  v.   MILLARD.       [§  189] 

10  Wallace  (U.  S.)  152.  —  rS6g. 

In  error  to  the  Supreme  Court  of  the  District  of  Columbia,  the 
case  being  this:  — 

Millard,  a  captain  in  the  military  service  of  the  United  States,  was, 
in  1865,  on  leaving  the  service,  a  creditor  of  the  government  for 
$859,  arrears  of  pay  as  captain.  In  settlement  of  this  account  the 
proper  paymaster  of  the  army  drew  and  issued  a  check  for  that  sum 
upon  the  National  Bank  of  the  Republic,  a  depositary  of  public 
money  and  financial  agent  of  the  United  States,  for  the  custody, 
transfer,  and  disbursement  of  the  government  funds,  having  funds 
for  the  payment  of  the  check. 

The  bank,  as  testimony  tended  to  show,  had  once  paid  the  check 
on  a  forged  indorsement  of  Millard's  name.  Ascertaining  and 
exposing  the  forgery,  and  recovering  possession  of  the  check,  Mil- 
lard now  presented  the  same,  demanding  payment  to  himself.  This 
payment  the  bank  refused  to  make.  Thereupon  he  sued  it,  declar- 
ing on  a  special  count  on  the  transaction,  and  also  on  a  general 
count  for  money  had  and  received  by  the  bank  to  his  use. 

On  the  trial  the  bank  requested  the  court  to  charge,  "  that  unless 
the  jury  were  satisfied  from  the  evidence  that  it  (7 ar/Ztu/  the  check 
in  favor  of  the  plaintiff,  or  his  assignees,  or  promised  to  pay  the  same 
to  the  plaintiff,  or  his  assignees,  he  was  not  entitled  to  recover." 
But  the  court  refused  so  to  charge,  and  verdict  and  judgment  having 
gone  against  the  bank,  it  brought  the  case  here  on  error;  the  c[ucs- 
tions  here  argued  and  considered  being:  ist.  The  general  one,  — 
whether  the  holder  of  a  bank  check  could  sue  the  bank  for  refusing 
payment  in  the  absence  of  proof  that  it  was  accepted  by  the  bank  or 
charged  against  the  drawer.  2d.  If  not,  whether  the  fact  existing 
in  this  particular  case,  that  the  check  was  on  a  national  bank  (a 
public  depositary  of  the  government  funds)  by  an  officer  of  the  gov- 
ernment, in  favor  of  a  public  creditor,  varied  the  general  rule. 


'See  5  Am.  &  Eng.  Encyc.  L.  (2d  ed.)  pp.  1055-1056.  —  Eu. 


586  CHECKS.  [art.  xvii. 

Mr.  Justice  Davis  delivered  the  opinion  of  the  court. 

The  only  question  presented  by  the  record  which  it  is  material  to 
notice  is  this:  Can  the  holder  of  a  bank  check  sue  the  bank  for 
refusing  payment,  in  the  absence  of  proof  that  it  was  accepted  by 
the  bank,  or  charged  against  the  drawer? 

It  is  no  longer  an  open  question  in  this  court,  since  the  decision 
in  the  cases  of  The  Marine  Bank  v.  The  Fulton  Bank  {2  Wallace, 
252),  and  of  Thompson  v.  Riggs  (5  Id.  663),  that  the  relation  of 
banker  and  customer,  in  their  pecuniary  dealings,  is  that  of  debtor 
and  creditor.  It  is  an  important  part  of  the  business  of  banking  to 
receive  deposits,  but  when  they  are  received,  unless  there  are  stipu- 
lations to  the  contrary,  they  belong  to  the  bank,  become  part  of  its 
general  funds,  and  can  be  loaned  by  it  as  other  money.  The  banker 
is  accountable  for  the  deposits  which  he  receives  as  a  debtor,  and  he 
agrees  to  discharge  these  debts  by  honoring  the  checks  which  the 
depositors  shall  from  time  to  time  draw  on  him.  The  contract 
between  the  parties  is  purely  a  legal  one,  and  has  nothing  of  the 
nature  of  a  trust  in  it.  This  subject  was  fully  discussed  by  Lords 
Cottenham,  Brougham,  Lyndhurst,  and  Campbell,  in  the  House  of 
Lords,  in  the  case  of  Foley  v.  Hill  (2  Clark  and  Finnelly,  28),  and 
they  all  concurred  in  the  opinion  that  the  relation  between  a  banker 
and  customer,  who  pays  money  into  the  bank,  or  to  whose  credit 
money  is  placed  there,  is  the  ordinary  relation  of  debtor  and  creditor, 
and  does  not  partake  of  a  fiduciary  character,  and  the  great  weight 
of  American  authority  is  to  the  same  effect. 

As  checks  on  bankers  are  in  constant  use,  and  have  been  adopted 
by  the  commercial  world  generally  as  a  substitute  for  other  modes 
of  payment,  it  is  important,  for  the  security  of  all  parties  concerned, 
that  there  should  be  no  mistake  about  the  status,  which  the  holder 
of  a  check  sustains  towards  the  bank  on  which  it  is  drawn.  It  is 
very  clear  that  he  can  sue  the  drawer  if  payment  is  refused,  but  can 
he  also,  in  such  a  state  of  case,  sue  the  bank?  It  is  conceded  that 
the  depositor  can  bring  assumpsit  for  the  breach  of  the  contract  to 
honor  his  checks,  and  if  the  holder  has  a  similar  right,  then  the 
anomaly  is  presented  of  a  right  of  action  upon  one  promise,  for  the 
same  thing,  existing  in  two  distinct  persons,  at  the  same  time.  On 
principle,  there  can  be  no  foundation  for  an  action  on  the  part  of  the 
holder,  unless  there  is  a  privity  of  contract  between  him  and  the 
bank.  How  can  there  be  such  a  privity  when  the  bank  owes  no  duty 
and  is  under  no  obligation  to  the  holder?  The  holder  takes  the 
check  on  the  credit  of  the  drawer  in  the  belief  that  he  has  funds  to 
meet  it,  but  in  no  sense  can  the  bank  be  said  to  be  connected  with 
the  transaction.      If  it  were  true  that  there  was  a  privity  of  contract 


n.  4]  drawee's  liability  to  holder.  6S7 

between  the  banker  and  holder  when  the  check  was  given,  the  bank 
would  be  obliged  to  pay  the  check,  although  the  drawer,  before  it 
was  presented,  had  countermanded  it,  and  although  other  checks, 
drawn  after  it  was  issued,  but  before  payment  of  it  was  demanded, 
had  exhausted  the  funds  of  the  depositor.  If  such  a  result  should 
follow  the  giving  of  checks,  it  is  easy  to  see  that  bankers  would  be 
compelled  to  abandon  altogether  the  business  of  keeping  deposit 
accounts  for  their  customers.  If,  then,  the  bank  did  not  contract 
with  the  holder  of  the  check  to  pay  it  at  the  time  it  was  given,  how 
can  it  be  said  that  it  owes  any  duty  to  the  holder  until  the  check  is 
presented  and  accepted?  The  right  of  the  depositor,  as  was  said  by 
an  eminent  judge,  (Gardiner,  J.,  Chapmanv.  White,  2  Selden,  417),  is 
a  chose  in  action,  and  his  check  does  not  transfer  the  debt,  or  give  a 
lien  upon  it  to  a  third  person  without  the  assent  of  the  depositary. 
This  is  a  well  established  principle  of  law,  and  is  sustained  by  the 
English  and  American  decisions.  {Chapman  v.  White,  2  Selden, 
412;  Butteriuorth  v.  Feck,  5  Bosworth,  341;  Ballard  v.  Randall,  r 
Gray,  do^;  Harker  v.  Anderson,  21  Wendell,  373;  Dykers  v.  Leather 
Manufacturing  Co.,  11  Paige,  616;  National  Bank  v.  Eliot  Bank,  5 
American  Law  Register,  711;  Parsons  on  Bills  and  Notes,  edition 
of  1863,  pp.  59,  60,  61,  and  notes;  Parke,  Baron,  in  argument  in 
Bellamy  v.  Majoribanks,  8  English  Law  and  Equity,  522,  523;  Wharton 
V.  Walker,  4  Barnwell  &  Cresswell,  163;  Warwick  v.  Rogers,  5  Man- 
ning tS:  Granger,  374;  Byles  on  Bills,  chapter  "  Check  on  a  Banker;  '" 
Grant  on  Banking,  London  edition,  1856,  96.) 

The  few  cases  which  assert  a  contrary  doctrine,  it  would  serve  no 
useful  purpose  to  review. 

Testing  the  case  at  bar  by  these  legal  rules,  it  is  apparent  that  the 
court  below,  after  the  plaintiff  closed  his  case,  should  have  instructed 
the  jury,  as  requested  by  the  defendant,  that  the  plaintiff,  on  the 
evidence  submitted  by  him,  was  not  entitled  to  recover.  The 
defendant  did  not  accept  the  check  for  the  plauitiff,  nor  promise  him 
to  pay  it,  but,  on  the  contrary,  refused  to  do  so.  If  it  were  true, 
as  the  evidence  tended  to  show,  that  the  bank,  before  the  check 
came  to  the  plaintiff's  hands,  paid  it  on  a  forged  indorsement  of  his 
signature,  to  a  person  not  authorized  to  receive  the  money,  it  does 
not  follow  that  the  bank  promised  the  plaintiff  to  pay  the  money 
again  to  him,  on  the  presentation  of  the  check  by  him  for  payment. 

//  may  be,  if  it  could  be  shown  that  the  bank  hatl  charg(.-d  the 
check  on  its  books  against  the  drawer,  and  settled  with  him  on  thai 
basis,  that  the  plaintiff  could  recover  on  the  count  for  money  had 
and  received,  on  the  ground  that  the  rule  ex  (djuo  et  bono  wouhl  be 
applicable,  as  the  bank,  having  assented  to  the  order  and  coinniuni- 


688  CHECKS.  [art.   XVII. 

cated  its  assent  to  the  paymaster,  would  be  considered  as  holding 
the  money  thus  appropriated  for  the  plaintiff's  use,  and  therefore, 
under  an  implied  promise  to  him  to  pay  it  on  demand. 

It  is  hardly  necessary  to  say,  that  the  check  in  question  having 
been  drawn  on  a  public  depositary,  by  an  officer  of  the  government, 
in  favor  of  a  public  creditor,  cannot  change  the  rights  of  the  parties 
to  this  suit.  The  check  was  commercial  paper,  and  subject  to  the 
laws  which  govern  such  paper,  and  it  can  make  no  difference  whether 
the  parties  to  it  are  private  persons  or  public  agents.  i^The  United- 
States  v.  Bank  of  Metropolis,  15  Peters,  377.) 

As  soon  as  the  deposit  was  made  to  the  credit  of  Lawler  as  pay- 
master, the  bank  was  authorized  to  deal  with  it  as  its  own,  and 
became  answerable  to  Lawler  for  the  debt  in  the  same  manner  that 
it  would  have  been  had  the  deposit  been  placed  to  his  personal  credit. 
Judgment  reversed  and  a  venire  de  novo  awarded.' 


5.  Liability  of    Drawee  to  Drawer  for  Wrongful  Dishonor. 

ATLANTIC  NATIONAL  BANK  v.   DAVIS. 

q6  Georgia,  334.  —  1895. 

Action  for  damages  for  dishonoring  plaintiff's  check.  The  check 
was  for  $12.48.  Plaintiff  had  on  deposit  in  defendant  bank  over 
$300.  By  a  mistake  of  a  clerk  payment  was  refused.  Defendant  on 
discovering  the  mistake  wrote  plaintiff  explaining  the  matter  and 
also  wrote  the  holder  or  holder's  forwarding  bank  explaining  the 
error  and  stating  that  plaintiff  was  one  of  defendant's  best  customers 
and  had  never  drawn  against  his  account  without  funds  to  his  credit. 
Verdict  for  plaintiff  for  $200.     Defendant  appeals. 

Lumpkin,  Justice.  —  i.  The  plaintiff's  check  came  by  due  course 
of  mail  to  the  defendant  bank,  upon  which  it  was  drawn,  and  in 

■Accord:  Northern  Trust  Co.  v.  Rogers,  60  Minn.  208;  First  N.  B.  v.  Clark, 
134  N.  Y.  368;.  Covert  v.  Rhodes,  48  Ohio  St.  66;  Northumberland  Bank  v. 
McMichael,  106  Pa.  St.  460;  5  Am.  &  Eng.  Encyc.  L.  (2nd  ed.),  p.  1061.  Contra: 
Munnv.  Burch,  25  111.  35;  Fonnerv.  Smith,  31  Neb.  107;  Simmons  v.  Bank,  41  So. 
Car.  177;  Gordon  v.  Muchler,  34  La.  Ann.  604;  2  Morse  on  Banks,  §§  490- 
538.  While  the  presumption  is  that  no  assignment  arises  from  the  giving  of  a 
check,  yet  this  is  controlled  by  the  actual  intention  of  the  parties.  If  it  is 
agreed  that  the  payee  shall  have  an  assignment  of  a  fund  or  any  portion  of  a 
fund,  he  is  in  the  ordinary  position  of  an  assignee  and  may  enforce  his  rights 
by  appropriate  action  in  law  or  equity.  Fourth  Street  Bank  v.  Yardley,  165 
U.  S.  634;  Risley  v.  Phcenix  Bank,  83  N.  Y.  318;  Coates  v.  First  N.  B.,  91  N.  Y, 
26;   First  N.  B.  v.  Clark,  134  N.  Y.  368.  —  Ed. 


II.  5-]  drawee's  liability  to  drawer.  689 

which  he  had  on  deposit  at  the  time  sufficient  funds  with  which  to 
pay  it.  The  check  was  returned  unpaid.  It  seems  clear  from  the 
evidence  that  this  was  done,  not  deliberately  or  maliciously,  but  in 
consequence  of  a  mistake  made  by  one  of  the  employees  of  the  bank. 
The  paper  was  not  protested  nor  wilfully  dishonored.  Still,  so  far 
as  the  plaintiff  is  concerned,  we  think  what  occurred  amounted  to  a 
refusal  to  pay  his  check.  The  consequences  to  him  resulting  from 
the  inadvertence  of  the  bank  official  were  exactly  the  same  as  if  there 
had  been  an  express  refusal  to  pay.  We  do  not  think  a  bank  should 
be  allowed  to  send  out  a  paper  with  a  badge  of  dishonor  upon  it,  and 
then  protect  itself  by  saying,  in  effect,  that  this  was  caused  simply 
by  its  own  carelessness. 

2.  It  was  not  denied  that  if  the  conduct  of  the  bank  amounted 
to  a  refusal  to  pay,  it  was  liable  in  damages  to  the  plaintiff;  but  the 
serious  question  was,  as  to  what  should  be  the  measure  of  such 
damages. 

There  was  no  proof  of  any  actual  or  special  damage,  and  the  defend- 
ant therefore  insisted  that,  at  most,  the  damages  awarded  should  be 
only  nominal.  We  have  given  the  subject  some  investigation,  and 
as  a  result,  we  find  ourselves  unable  to  accept  this  as  a  correct 
proposition  of  law.  The  following  authorities  are  pertinent,  and 
throw  much  light  upon  the  question:  — 

In  2  Addison  on  Contract,  §  820,  the  author,  after  stating  the 
general  rule  that  a  banker  is  bound  to  honor  the  checks  of  his  cus- 
tomers, if  presented  within  banking  hours  and  provided  he  has  in 
hand  sufficient  funds  for  the  purpose  belonging  to  the  customers,  adds : 
"  And  if  he  refuses,  he  is  liable  to  an  action  by  the  customer  for  sub- 
stantial damages,  without  proof  of  actual  damage;  for  it  is  a  discredit 
to  the  customer  to  have  his  cheque  refused  payment."  Again,  in 
2  Morse  on  Banks,  §  458,  after  a  statement  of  the  general  rule  relat- 
ing the  bank's  duty  in  the  premises,  we  find  the  following:  "  This 
duty  and  this  right  are  so  far  substantial,  that  if  the  bank  refuses, 
without  sufficient  justification,  to  pay  the  check  of  the  customer,  the 
customer  has  his  action  for  damages  against  the  bank.  It  has  been 
said  that  if  in  such  action  the  customer  does  not  show  that  he  has 
suffered  a  tangible  or  measurable  loss  or  injury  from  the  refusal,  he 
shall  recover  only  nominal  damages.  But  the  better  authority  seems 
to  be,  that  even  if  such  actual  loss  or  injury  is  not  shown,  yet  more 
than  'nominal  damages  shall  be  given.  It  can  hardly  be  possible 
that  a  customer's  check  can  be  wrongfully  refused  payment  without 
some  impeachment  of  his  credit,  which  must  in  fact  be  an  actual 
injury,  though  he  cannot  from  the  nature  of  the  case  furnish  inde- 
pendent distinct  proof  thereof." 

NEGOT.   INSTRUMENTS  —  44. 


690  CHECKS.  [art.   XVII. 

Accordingly,  it  would  seem  that  the  plaintiff's  recovery  is  not  to 
be  limited  to  merely  nominal  damages.  We  find  authority  for  saying 
that  in  such  a  case  he  should  be  awarded  "  temperate  "  damages. 
Thus,  in  Birchall  v.  Third  Natiojial  Bank  (19  Cen.  Law  J.  390),  it 
was  ruled  that  a  bank  is  liable  in  temperate  damages  to  a  customer 
for  a  wrongful  dishonor  of  his  check,  without  proof  of  special  dam- 
ages. In  the  notes  appended  to  an  article  on  "  Damages  for  Wrong- 
ful Dishonor  of  Checks,"  following  the  report  of  the  above  cited 
case,  will  be  found  a  large  collection  of  authorities,  which  may  be 
of  help  to  any  one  desiring  to  further  pursue  an  investigation  into 
this  question.  Another  authority  for  the  allowance  of  "  temperate  " 
damages  to  a  customer  for  wrongful  dishonor  of  his  check,  although 
special  damage  is  not  shown,  is  Newmark  on  Special  Bank  Deposits, 
§  215;  and  the  same  rule  is  stated  in  3  Am.  and  Eng.  Enc.  of  Law, 
p.  226,  under  the  title  "  Checks  "  (2d  ed.,  vol.  5,  pp.  1059-1060). 
In  a  note  to  the  text,  Birchall's  case,  supra,  is  cited. 

3.  In  view  of  all  the  evidence  disclosed  by  the  record,  we  think 
the  verdict  for  $200  rendered  in  the  present  case  was  "  temperate," 
and  therefore  sustainable. 

Judgment  affirmed.' 

'Accord:  Schaffner  v .  Ehrman,  139  111.  109,  where  a  judgment  for  $450  for  dis- 
honoring a  check  for  $249  was  upheld  as  reasonable;  Patterson  v.  Ma7-inc  N. 
B.,  130  Pa.  St.  419,  verdict  for  $300  held  reasonable.  See  also  Bank  of  Commerce 
V.  Goos,  39  Neb.  437.  Where  the  depositor  proceeds  as  for  a  breach  of  contract 
and  not  in  tort  it  seems  that  in  the  absence  of  allegation  and  proof  of  special 
damageSj  he  can  recover  only  nominal  damages.  Marzetti  v.  Williams,  i  B. 
&  Ad.  415;  Brooke  v.  Tradesmen' s  N.  B.,  69  Hun  (N.  Y.)  202;  Burroughs  v. 
Tradesmen' s  N.  B.,  87  Hun  (N.  Y.)  6;  Citizens'  N.  B.  v.  Importers  and  Traders' 
Bank,  119  N.  Y.  195.  —  Ed. 


I  N  D  BX. 


The  References  are  to  the  Pages. 


Acceptance :  (See  Non-acceptancb.) 
definition  and  effect,  6,  31,  448-451. 
form  and  effect,  61-62,  610-621. 
writing  and  signature,  61,  610-611. 
parol,  6ii«,  621. 
only  by  drawee,  61,  611-612. 
delivery  necessary,  612-613. 
promise  to  accept,  62,  613-616. 
by  refusal   to  return  bill,  62,  607,  612-613, 

617-61Q. 
of  incomplete  or  dishonored  bill,  62,  619-621. 
time  allowed  for,  62,  6i9«. 
kinds  of,  63-64,  621-631. 

general  acceptance,  63,  621-626. 
qualified  acceptance,  64,  626-631. 
conditional,  64,  626-628. 
partial,  64,  628. 
local,  64,  499,  628. 
qualified  as  to  time,  64,  629. 
by  part  of  drawees,  64,  630,  640^. 
effect  of  qualified  acceptance,  64,  630-631. 
of  bills  in  a  set,  78,  661   662. 
Acceptance  for  Honor: 
when  allowed,  73,  651. 
parties  to,  73,  651. 
for  what  arriount,  73. 
formal  requisites,  73,  651. 
protest  for  ncn-acceptance,  73,  651. 
writing  and  signature,  73. 
interpretation, 

for  whose  honor,  73. 
effect  on  maturity  of  bill,  74. 
contract  of  acceptor  for  honor, 
terms  of,  74,  611-612,  653,  656. 
in  whose  favor,  74. 
admissions  by.  654. 
proceedings  subsequent  to, 
presentment  to  drawee  and  protest,  74,  652, 

656. 
presentment  to  acceptor  for  honor,  74,  653, 

656. 
excuse  for  delay,  75,  655-657. 
protest   for  non-payment   by    acceptor  lor 
honor,  75. 

Acceptor: 

consideration,  336-337. 
liability  of,  31,  448,  451. 
admissions  of,  31,  448-450. 
only  drawee  can  be,  61,  603-604,  611-612. 
presentment  not  necessary  to  charge,  498-500. 
Acceptor  for  Honor : 
liability  of,  74,  612,  653,  656. 
admissions  of,  654. 
who  may  be,  73. 
Accommodation  Paper: 
accommodation  party, 

defined,  20. 

liability  to  holder,  20,  339-340- 

notice  when  maker  is,  53,  503- 

order  of  liability  of,  480-485. 
accommodated  party, 

not  entitled  to  presentment,  40. 

not  entitled  to  notice,  53,  563. 

payment  by,  54,  55.  578-579.  "?»-*^- 

transfer  by,  after  maturity,  388-393. 


Accommodation  'Pa.'per  —  contiuued. 
release  of,  596«. 
consideration  for,  339-340. 
amount  recoverable  on,  419. 
payment  of  supra  protest,  659,  66o«. 

Action  on  Nej^otlablu  Paper : 

defined,  6. 

upon  last  day  of  maturity  premature,  388,  478, 

5oi«. 
transfer  for  purpose  of,  384«. 
bringing,  is  a  demand,  498. 
by  restrictive  indorsee,  23,  364. 
by  executor  of  holder,  379-381. 
by  husband  of  holder,  38i«. 
between  indorsers,  480-487. 
upon  instrument  payable  to  bearer,  342. 
after  dishonor  for  non-acceptance,  68,  641-643. 
on  bills  in  a  set,  665«. 
against  agent  signing  without  authority,  311- 

316. 
upon  warranties  in  sale,  452-474. 
upon  guaranty,  491-494. 
upon  original  consideration,  385,  587;;,  589. 
to  recover  money  paid  on  forged  paper,  448-450. 

Additional  Act : 

provision  for,  renders  instrument  non-negoti- 
able, 10,  228-229. 
exceptions  to  rule,  10,  229-234. 

Admini«itrator :  (See  Executor.) 

Admi»i»«Ioiis : 

by  maker,  31,  447. 

by  acceptor,  31,  448-451. 

by  drawer,  31,  452. 

by  indorser,  st-c  Warranty. 

Ajjent : 

signature  by,  16-17,  304,  311,  317-321,  517,  6i3w. 

liability  of,  16,  36,  308,  311,  473. 

presentment  by,  37,  501. 

presentment  to,  517. 

acceptance  by,  612//. 

notice  ofdislionor  by  45,  528-533. 

notice  (  f   lislionor  to,  47. 

indorsement  for  collection  to,  23,  357-361,  364. 

drawing  on  principal,  613-616. 

All    nges 

nature  and  use,  21,  348-350,  376. 

Alteration: 

effect  of,  57,  428;/,  448-450.  585-592. 
through  negligence  of  maker,  590-593 
material,  57,  588«. 
burden  of  proof,  588;;. 
innocent,  592  593- 
by  form  of  acceptance,  621-626. 
Allernallve  Parllcn: 
p.iyics,  whether  allowed,  258-250. 
(Iravvies,  whether  allowed,  61.3  6o^. 
makers,  whether  allowed,  604//. 

Ambii£uily: 

of  language  in  instruments,  15  16,  398-304. 
of  signatures  to  instrumentH,  15,  304-333. 
Amlti:;iioiiN  liiMiriimcnl  t 

construi  tioii  of,  14,  27.  -^72.  208  304 . 
may  l)e  treated  as  bill  or  note,  15,  303. 


[Cgil 


692 


INDEX. 


The  References  are  to  Pages. 


Amount: 

must  be  certain,  8,  9,  180-190,  185-218. 
recoverable,  19,  29,  337-338,  419-421,  575. 

Antecedent  Debt. 

is  valuable  consideration,  18,  327-339,  360. 
accommodation  paper,  339-340.  387-388. 
Assignee:  {See  Bankrupt.) 

Assignment : 

indorsement  by,  343-346- 

qualified  indorsement  is,  23,  365. 

transfer  without  indorsement,  375-378- 

of  guaranties,  491-494. 

of  funds,  bill  is  not,  59,  605-607. 

check  is  not,  81,  685-688. 
for  benefit    of   creditors,   protest  for    better 
security,  71. 

Attorney's  Fees: 

provision  for,  does  not  render  sum  uncertain, 
9,  215-217. 

Bad  Faitli: 

equivalent  to  knowledge,  29,  397-399.  4oo-4'7- 
undervalue  as  evidence  of,  397-399. 

Banlc  :  (See  Checks.) 
definition  of,  6. 
cashier  as  payee  or  indorsee,  25,  306^,   32o«, 

349.  373«- 
bill  or  note  payable  at, 

presentment  of,  39,  349,  510,  52i«,  524-527- 

is  an  order  on,  42,  52i«. 

not  by  mere  notice,  514. 

notice  of  dishonor,  532-533,  55o-5S»- 
certificate  of  deposit  by,  171-172. 
savings  bank  order  by,  177-179. 
draft  by,  677«. 
purchase  of  paper  by  national,  472. 

Bank  Boolt^ : 

condition  of  return  of,  177-179. 

Bank  Notes : 

history  of,  140. 

whether  current  money,  222,  223. 

whether  demand  necessary,  499^- 
Bankriipt : 

notice  of  dishonor  to,  48,  542K,  563. 

presentment  for  acceptance  to,  66. 

protest  for  better  security  against,  71. 

discharge  of,  does  not  discharge  instrument, 
592  «. 
Bearer: 

defined,  6,  263. 

bill  or  note  payable  to,  8,  12,  263-270,  342. 

instrument  indorsed  in  blank  payable  to,  22. 

indorsement  of  instrument  payable  to,  24,  368. 

Better  Security : 

protest  for,  71. 

Bills  of  Excliauge : 

history,  142-149. 
form,  59,  2S3,  603. 

general  requisites,  see  Form  of  Negotiable 
Instruments. 

drawee,  8,  270-275,  59,  603-604. 

referee  in  case  of  need,  60,  605. 
interpretation,  sec  Intekpret.-^tion. 

bill  not  an  assignment  of  funds,  59,  605-607- 

inland  and  foreign  bills,  60,  608. 

distinguished  from  check,  79,  673-676. 

Bills  of  Excliange  Act: 

te.\t  of,  87-114. 
origin  of,  1 17-122. 
construction  of,  119,  127,  442. 

Bills  in  a  Set : 

when  treated  as  one  bill,  77,  661,  663-665. 
negotiation  of  parts  to  different  persons,  77, 
661,  662. 

rights  of  holder,  77. 

liability  of  indorsers,  78. 
acceptance  of,  78,  661,  662. 


Bills  in  a  Set  — continued. 

payment  of,  78,  662. 

discharge  of,  78. 

copies  distinguished,  663. 
Blank  Indorsement:  {See  Indorsement.) 

instrument  payable  to  bearer,  12,  268. 

definition  and  effect,  22,  352. 

converted  into  special,  22,  352-354. 

Blanks: 

when  blanks  may  be  filled,  13-14,  248«,  288-298, 

386. 
distinguished  from  spaces,  59o«. 
as  notice  of  defects,  27,  386. 

Boua-fide  Holder:  (See  Holder  in  Dle 
Course.) 

Bonds : 

when  negotiable.  149-160,  452-468. 
how  made  non-negotiable,  82. 
public  or  corporate,  34. 
Broker :  (See  Agent.) 

Burden  of  Proof: 

when  on  holder  to  prove  he  is  holder  in  due 
course,  30,  351,  422-425,  430-431. 

to  show  mistake  in  cancellation,  56. 

to  show  alteration,  588//. 

to  show  that  instrument  was  transferred  when 
overdue,  374. 

CancellatSlon : 

intentional,  54,  56,  428",  448-450,  579-5°*- 
unintentional,  56,  582-585. 
burden  of  proof,  56. 

Capacity  of  Parties: 

to  indorse,  17,  321-322. 
admissions  of,  31,  447,  448. 
warranty  of,  34,  468. 
drawee,  60,  67,  559". 
incapacity  as  a  defense,  427,  49s- 

indorsement,  when  payable  to,  25,  320W,  349, 

373«- 
signature  by,  306;/. 

Certainty: 

of  sum  payable,  8,  9,  180-190,  195-218. 
of  promise,  8,  9,  176-195. 
of  time,  9-10,  234-248. 
of  parties. 

drawee,  8,  270. 

payee,  12,  248-253. 

Certiflcate  of  Deposit : 

negotiability  of,  171-172. 
demand  necessary,  499«. 
distinguished  from  deposit  slip,  i72«. 
distinguished  from  savings  bank  order,  177. 

Certiflcate  of  Protest : 

form  and  contents,  69-70,  643-647. 
correction  of,  513. 

as  to  presentment  for  acceptance,  637,  646,  647. 
as  evidence  of  notice  of  dishonor,  54o«,  568-570. 

Certification  of  Clieck : 

effect  upon  bank's  liability,  80. 

effect  upon  drawer's  liabihty,  80,  682-685. 

Cliecks: 

defined,  79. 

distinguished  from  bills,  673-676. 

presentment  for  payment, 

effect  of  delay  upon  drawer  s  liability,  80, 
676-681.  ,   ,.  .  ...^      . 

effect  of  delay  upon  indorser  s  liability,  677//. 

due  diligence  in,  676-681. 
certification  by  bank, 

effect  upon  bank's  liability,  80. 

effect  upon  drawer's  liability,  80,  682-685. 
liability  of  drawee, 

to  holder,  81,  685-688. 

to  drawer  for  wrongful  dishonor,  688-690. 


INDEX. 


693 


The  References  are  to  Pages. 


Codes : 

American,  5-83,  122-135. 
Continental,  125-127. 
English,  87-114,  117-122. 
construction  of,  119,  127-131,  442. 

Collateral  Security: 

authorizing  sale  of,  does  not  render  instrument 
non-negotiable,  10,  229-230. 

instrument  issued  as,  is  contingent,  245. 

instrument  transferred  as,  for  antecedent  debt, 
18,  327-333,  339-340. 

must  be  tendered  upon  presentment  for  pay- 
ment, 520-521. 

failure  to  sell,  598-599. 

Collection: 

bill  or  note  payable  with  costs  of,  9,  215-217. 
indorsement  for,  23,  357.361,  364,  532-533. 
of  check,  time  allowed,  676-681. 

Conditional:  (See  Unconditional.) 
orders  or  promises,  8,  9,  176-195,  590-591. 
delivery,  T4-15,  275-283. 
indorsement,  24,  367. 
acceptance,  64,  626-628. 

Consideration : 

necessity  of,  327«. 

presumption  of,  18,  325-327,  354-355,  668-671. 

adequacy  of,  327«,  397-399- 

what  constitutes,  18. 

payment  of  pre-existing  debt,  18,  327. 

collateral  security  for  pre-existing  debt,  18, 
327-333. 

in  accommodation  paper,  ao,  339-340. 
effect  of  want  or  failure  of,  19,  338-339. 
need  not  be  specified,  11,  283. 
for  acceptor's  promise,  336. 
by  preceding  holder,  ig,  334-338. 
action  upon  original,  385,  587;/,  589. 
statement  of,  does  not  render  conditional,  9, 

190-195. 
in  restrictive  indorsement,  361-362. 
in  transfer  in  trust,  362. 
patent  right  as,  81. 
speculative,  82. 

Construction : 

of  ambiguous  instruments,  13,  15-16,  285-324. 
of  codifying  statutes,  ng,  127-131,  442. 

Constructive  Notice: 

from  form  of  paper,  405-414. 

Continjicncj- : 

instrument  payable  on,  not  negotiable,  9,  10, 

176-183,  241-247. 
what  is  not,  g,  i83-ig5. 

Contribution : 

among  sureties,  482-485,  561-562. 

Copy  of  Bill : 

use  in  protest,  69,  70,  643-646. 
negotiating  copy,  663. 

Corporation : 

indorsement  by,  17,  349. 

payee  a  fiscal  officer  of,  25. 

seal  of,  on  corporate  paper,  284  n. 

paper  of,  diverted  by  officer,  407-412. 

signature  by  officers  of,  3i7-3.!o. 

paper  of,  indorsed  by  directors,  561-563. 

Costs : 

provision  for  costs  of  collection  does  not 
render  some  uncertain,  g,  215. 

of  prior  suit,  whether  recoverable  by  surety, 
421. 
Coverture  ; 

as  a  defense,  427. 

transfer  by,  38i«. 

transfer  after,  592». 

note  signed  by  married  women,  46S-469. 

Currency : 

whether  treated  as  money,  22i«. 


Current  Funds : 

whether  treated  as  money,  2Iq-22(. 
Current  r?Ioney  : 

particular  kind  may  be  specified,  ii. 
what  constitute,  219-227. 
Custom : 
as  origin  of  law  merchant,  140-141,  147-149, 
151-160. 

Date  : 

non-essential,  10,  283,  301. 

presumption  as  to,  13,  15,  301. 

mistake  in,  285,  286. 

ante-dated  and  post-dated    instruments,   13, 
285-287. 

when  date  may  be  inserted,  13,  288-289. 

change  of,  a  material  alteration,  57. 

on  or  before  fixed,  209. 

alteration  of,  57. 

of  acceptance,  62-63. 

post-dated  check,  676  «. 
Day  :    {See  Time.) 
Death  :    (See  Executor.) 

of   party   primarily    liable,  39,   4i5«,  518-519, 
5Sg«,  646-647. 

of  drawer  or  indorser,  47  540-542. 

of  drawee  before  acceptance,  66,  67. 

instrument  payable  at  or  after,   240-241,  277- 
279.  325.  670-671. 

transfer  by,  379-381. 

Default: 

in  payment  of  installment,  9,  208-211. 

Defenses : 

absolute,  426W,  426-428. 

conditional  or  personal,  ig,  28,  29,  428«,  428- 

43°- 
burden  of  proof,  30,  422-425,  430-431. 
defenses  to  negotiable  instruments, 

alteration,  57,  428  «,  448-450,  585-592. 

cancellation,  54,  56,  428//,  579-585. 

discharge  in  bankruptcy,  428. 

diversion  by  agent,  327-333,  407-412. 

duress,  425-430. 

failure  of  consideration,  3.38,  351,  375,  413, 

452- 
forgery,  14,  18,  280,  289,  322,  448,  473. 
fraud,  428«,  336,  337,  415,  4'7.  A^-<  45>.  496. 
fraud  as  to  nature  of  contract,  431-445. 
garnishment,  428. 
infancy,  321-322. 

illegality,  424';,  425,  426«,  4-!7«.  4-8",  466,  473. 
non-demand  or  notice,  4g8-5oo. 
parol  agreement,  354. 
payment,  2  >,  54,  428«,  304,  396.  571,  599. 
set-i)ff,428«,  302,  387,  495. 
unauthorized  act  of   agent,   13-14,    291-298, 

304,  320,  428. 
want    of  consideration,  42  8«,   327,  333,  .388, 

397.  45  •■  „  , 

want  of  delivery,  428//,  279-283,  452-461. 
want  of  delivery  asa  negotiable  instrument, 

4JI    )45' 

want  of  title  in  holder,  382-384. 
defenses  to  guaranty,  494-497- 
Delay  :    (.S-r  Dm.igrncp..) 
in  making  presentment,  40,  237,   S-J'.  80,  076- 

681. 
in  giving  notice,  52,  556-558. 
in  pnjcceding  against  principal,  598-500- 
in   making    presentment   for  acceptance,   66, 

in  making  protest,  7J. 
Delivery  : 

defined,  '). 

when  presumed,  15. 

of  incomplete  instrument,  13-14,  280-283. 

essential,  1 1,  275-283,  348//. 

conditional,  .875-276. 

what  of,  as  defense,  279-280,  425-445- 

negotiation  by.  21,  342. 


694 


INDEX. 


The  Refere7ices  are  to  Pages. 


Delivery  —  continued. 

warranty  in  negotiation  by,  34,  452-471. 

after  acceptance,  612. 

indorsement  of  paper  negotiable  by,  35,  475. 

upon  payment,  38,  76. 

of  notice  of  dishonor,  46,  537-541- 

obtained  by  trick,  431-445. 
Deiiiaud  :   (5(?t' Presentment  for  Payment.) 

Demand  Bill  or  IVote : 

when  payable  on  demand,  8,  11,  234-237. 
when  overdue,  28,  396-397,  635-636. 
when  presentment  for  payment  must  be  made, 
37-  504-509- 

De]>0!iiit ; 

indorsement  for,  365. 

Deposit  Slip  : 

distinguished  from  certificate  of  deposit,  172^. 

Diligence: 

in  matcing  presentment.  40-41,  501-512,  655. 
in  giving  notice,  52-53,542-552,  563-5^4. 
delay  e.xcused  when,  521-523. 
when  dispensed  with,  72,  523-527,  558-568. 
in  making  presentment  for  acceptance,  67,  641. 
in  presenting  check,  8d,  676-681. 
in  making  protest,  72. 
Disoljargeof  Iiistriiment : 
payment  and  retransfer,  26,  54,  571-579. 
payment  in  due  course,  26,  54,  571-572. 
what  is  payment,  573. 
payment  by  indorser,  574-577. 
payment  by  party  accommodated,  55,  600-602. 
payment  or  purchase,  578-570. 
retransfer,  579«,  579-5851  592",  599-600. 
cancellation  or  renunciation,  54,  56,  579-585. 
intentional,  579-581. 
mistaken,  5S2-585. 
alteration,  57,  585-592. 
effect  of,  57,  585-589. 
through  negligence  of  maker,  590-59S. 
material,  57,  588«. 
burden  of  proof,  s88«. 
innocent,  589. 
by  operation  of  law,  592-593. 
of  bills  in  a  set,  78. 
DiseUarge  of  Surety: 

what  effects,  43-44,  55.  592-599i  582-535,  494-497' 
reservation  of  rights  against,  55,  594-598. 
by  qualified  acceptance,  64,  631. 
by  payment  for  honor,  76,  65S. 
by  non-presentment  for  acceptance,  66,  633. 
by  failure  of  holder  to  take  necessary  steps,  68 
by  non-protest,  69. 
by  payment  for  honor,  76. 
by  non-presentment  of  check,  80,  676. 
Dislionor  :  {See  Presentment;  Notice;  Pro 

TEST.) 

by  non-payment.  41,  75. 

by  non-acceptance,  61,  68. 

notice  after,  43. 

protest  after,  54,  69. 

acceptance  after,  62,  620-621. 

action  for  wrongful,  688-699. 
Drawee  :  {See  Acceptance.) 

must  be  certain,  8,  270-275. 

in  case  of  need,  60,  605. 

liability  of,  59,  605-607,  81,  685-690. 

joint  drawees,  59,  603-604. 

alternative  or  successive,  59,  603-604. 

only  drawee  can  accept,  61,  611. 

fictitious,  excuse  of  steps,  41,  52,  53,  559«. 

may  be  also  payee,  12,  254-255. 

may  be  also  drawer,  273-274. 
Drawee  in  Case  of  Need  :  (See  Referee 

IN  Case  of  Need.) 
Draw-er :  (See  Form;  Presentment;  Notice; 
Protest.) 

contract  of,  31,  452. 

admissions  of,  31,  452. 


Drawer  —  continued. 
when  not  entitled  to  presentment,  40,  523. 
when  not  entitled  to  notice,  52,   558-561,  563- 

568. 
of  check,  80,  676-681,  682-685,  688-690. 
discharge  of,  43-44,  64,  66,  69,  80. 
payment  by,  55,  599. 
may  be  payee,  12. 
may  be  drawee,  273-274. 

Due  Bill : 

whether  a  negotiable  instrument,  167-171. 

Durej^s; 

as  a  defense,  28,  425. 

Election : 

of    holder  to   require    something    in  lieu  of 
money,  10,  233-234. 
Escrow : 

delivery  in,  276«. 
Estate  ;  (See  Executor.) 

instrument  payable  to  an,  252-253. 

Excliauife : 

provision  for,  does  not  render  sum  uncertain, 

9,  212  215. 
note  payable  in,  not  negotiable,  218-219. 
recovery  of  re-e.xchange,  421?/. 
Excuse  of  Steps  :  (See  Diligence.) 

Executor: 

acceptance  by,  183-185. 

of  holder  may  enforce  payment,  379-381. 

presentment  for  payment  to,  39,  518-519,  539«, 

646-647. 
notice  of  dishonor  to,  47,  541. 
transfer  of  instrument  to  maker  as,  593«. 
presentment  for  acceptance  to,  66. 
instrument  payable  to,  251-253. 
Exemptions : 
waiver  of,   does  not  render  instrument  non- 
negotiable,  10,  231-232. 

Extinguisbment :  (See  Discharge.) 

Failure  of  Consideration :  (See  Con- 
sideration.) 
effect  of,  ig,  338. 
as  a  defense,  338,  351,  375,  412,  452. 

Fictitious  Parties  : 

payee,  instrument  payable  to  bearer,  12,  2S3«, 

263-258. 
signature  fictitious,  16,  306-311. 
drawee,  notice  excused,  52,  53,  559?;. 

bill  may  be  treated  as  note,  60. 

presentment  e.xcused,  41,  67,  552?^ 

Figures : 

discrepancy  between  words  and,  15,  298-301. 

Finder: 

of  instrument,  right  of  action,  382. 

Foreign  Bills : 

defined,  60,  608. 

require  protest,  54,  69,  501,  566,  643. 

Foreign  Money : 

whether  treated  as  money,  225-227. 

Forgery : 

of  signatures  generally,  18,  322-324. 
of  drawer's  signature,  448-450. 
by  filling  blanks,  289-293,  590. 
of  indorsement,  468. 
of  renewal  note,  582-585. 
ratification  of,  324. 
money  paid  on,  323/;,  448,  473. 
as  a  defense,  14,  iS,  280,  289,  322,  448,  473. 
warranty  against,  34. 
Form  of  Negotiable  Instruments* 
writi.ng  and  signature,  8,  161-164. 
promise  or  order,  8,  164-175. 

unconditional,  9    176-195. 
certainty, 

of  sum,  9,  195-218. 


INDEX. 


69: 


The  Re/erences  are  to  Pages. 


Form  of  Negotiable  Instrumeuts  — 

continued. 

of  time,  9,  II,  234-247. 

of  payee,  12,  248-253. 

of  drawee,  8,  270-275. 
payable  in  money,  8,  2x8-227. 
no  additional  act,  10,  228-234. 
payable  to  order  or  bearer,  11,  12,  248-270. 
delivery,  14,  275-283. 
non-essentials,  10,  11,  283-285. 

Fraud: 

as  a  defense,  28,  428«,  336,  337,  415,  417,  422, 
451,  496- 

as  to  nature  of  instrument,  431-445. 

by  seller,  34,  469-471. 
Fund: 

particular  fund  designated  for  reimburse- 
ment, 9,  183. 

bill  is  not  assignment  of,  59,  605. 

check  is  not  assignment  of,  81,  685. 

current  funds,  whether  money,  219-221. 

acceptance  "when  in  funds,"  628^. 

want  of  funds  in  hands  of  drawee,  effect,  40, 
52,  67,  560-561,  633-635 

General   Acceptance: 

form  and  effect  of,  63,  621-626. 
to  pay  at  a  particular  place,  63,  625-626. 
Gift ; 
of  donee's  obligation,  56,  579-581. 

Good  Faltli :  (See  Notice  ;  Holder  in  Due 

Course.) 
what  constitutes,  27,  397,  572. 

Grace,  Days  of: 

abolished,  42. 

when  last  day  of,  a  holiday,  504. 
non-negotiable  notes  have,  667-668. 
sight  bill  entitled  to,  234-236. 

Guaranty:  (See  W  .\ku.\nt\- .) 

transfer  by  indorsing,  346-348. 

writing  above  blank  indorsement,  352-353. 

contract  of  guarantor,  487-491. 

whether  transferable,  491-494. 

defenses  to,  494-497. 

indorser  of  non-negotiable  note  undertakes, 
672-673. 

whether  accommodation  contract  is  a  con- 
tinuing, 388-393. 

whether  irregular  indorsement  a,  48o«,  673«. 

whether  acceptance  by  stranger  a,  6i2«. 

Holder : 

defined,  6. 

when  deemed  holder  for  value,  19,  27,  334-338, 
386-419. 

may  convert  blank  indorsement  into  special, 
22,  352. 

under  special  indorsement  of  mstrument  pay- 
able to  bearer,  24. 

of  instrument  transferred  without  indorse- 
ment, 26,  375. 

may  strike  out  indorsement,  26,  55,  375. 

may  sue  in  his  own  name,  27,  379-385. 

title  of,  in  action,  382-384. 

when  not  deemed  holder  in  due  course,  28, 
396-397. 

entitled  to  benefit  of  warranty,  34. 

principal  debtor  as,  54,  578. 

discharge  of  instrument  by.  54,  571. 

discharge  of  party  by,  55,  592- 

renunciation  of  rights  by,  56,  579-581. 

may  refuse  oral  acceptance,  61. 

may  refuse  qualified  acceptance,  64,  630. 

option  to  resort  to  referee  in  case  of  need,  60. 

consent  to  acceptance  for  honor,  73. 

refusal  to  receive  payment  for  honor,  76. 

procuring  certification  of  check,  80,  682. 

duties  of,  68. 
.^ee  Prrsentmknt  for  Payment. 
Notice  of  Dishonor. 


Holder  —  continued. 

Present.ment  1  ok  Acceptance. 

Protest. 
rights  of,  upon  dishonor,  68 
duty  to  receive  payment  for  honor,  76. 
securing  certification,  of  check,  80,  682. 
no  action  against  bank  on  check,  81,  685. 

Holder  In  Due  Course  :  (See  Defenses) 
requisites  to  constitute, 
instrument  complete  and  regular,  27,  386, 
instrument  not  overdue,  27,  387-397. 
taken  in  good  faith  and  for  value,  27,  327- 

33.3.  397-399- 
taken  without  notice   of  inhrmity,    28,   29, 

400  417, 
who  not  deemed  a,  28,  396,  442. 
holder  deriving  title  from,  29,  417-419. 
may  recover  full  amount,  29,  419-421. 
burden  of  proof,  30,  422-425. 
notice  to,  before  consideration  paid,  28,  415. 
of  instrument  wrongfully  filled  up,  14,  28^-283. 
of  instrument    transferred   without    indorse- 
ment, 26. 
of  altered  instrument,  57,  587. 
of  instrument  transferred  after  dishonor  for 

non-acceptance,  53. 
of  part  of  bills  in  a  set,  77. 
entitled  to  warranties,  34,  452-474. 
Holder  for  Value  : 
what  constitutes,  iq,  334-338,  397-399. 
may  enforce  against  accommodation  party,  20, 

330- 
amount  recoverable  by,  ig,  337-338. 

Holiday  : 

what  is,  7,  83-84. 
bill  or  note  due  on,  42,  so4«. 
presentment  for  acceptance  on,  67. 
Hour  : 
whether  reasonable  for  presentment,  509-512. 
of  service  of  notice  of  dishonor,  48,  543«. 
of  closing  of  mails,  49,  545-547. 
for  presentment  for  acceptance,  66. 

Husband  and  Wife:  (iVs  Coverture.) 

Ille«allty: 

as  a  defense,  28,  426-427,  466,  472. 

warranty  against,  34,  466-467. 
IinpoNNlbllity : 

as  excuse  for  steps,  524-527,  557-SS8. 
Incouiplete  InMtriiineut : 

want  of  delivery  of,  a  defc-nse,  14,  280-^83. 

as  notice  of  defects,  27,  386. 

acceptance  of,  62,  619-620. 

Indorsee : 

cannot  be  two  or  more  severally,  21. 
special,  must  indorse  to  transfer,  32.  351. 
under  restrictive  indorsement,  23,  354-365. 
under  conditional  indorsement,  24,  367- 
if  two  or  more,  all  must  indorse,  24,  371. 
cashier,  payable  to  bank,  25,  373. 
name  missiiellcd,  .53,  373. 
in  trust,  ^3,  -ifn-  y>^. 
ludorMeineiit : 
defined,  6. 

form  required,  21,  348-351,  161-162,  164. 
must  be  of  whole  instrument,  ai,  350. 
kinds  of,  22,  351-368. 

special,  22,  351. 

blank,  12,  22,  352-354,  268270. 

rest ri(  live,  22,  354-365. 

qiialilied,  23,  365  367. 

conditional,  .^.  367  368. 
of  instriimi'nt  payable  to  bearer,  24,  368-371. 
of  instriiini'Mt  payable  lo  two  or  more  person*, 

2.(.    371     372. 

of  inslrumciil  payable  lo  cashier,  25.  320/1,  349, 

373"- 
where  name  misspelled,  25,  373-374. 
in  representative  capacity,  25,  374. 


696 


INDEX. 


The  References  are  to  Pages. 


Indorjsement  —  continued. 
presumption  as  to  time  of,  25,  374. 
presumption  as  to  place  of,  26,  375. 
striking  out,  26,  375. 
transfer  by,  21,  343. 
transfer  witnoui,  26,  375-378. 
by  infant  or  corporation,  17,  321-322,  452. 
of  overdue  instrument,  237,  356. 
warranty  from,  34,  453-472. 
forged,  322-323. 
filling  up  blank,  352. 
ludoi'Mci* ; 
who  is,  32,  348-349. 
liability  of  general,  34,  474-478. 
warranties  of,  34,  452-472. 
for  what  amount  liable,  29,  420. 
irregular,  32,  478-480. 
order  of  liability,  35,  480-486. 
when  not  entitled   to   notice  of   dishonor,  53, 

561-568. 
payment  by,  574-577- 
of  instrument  payable  to  bearer,  24,  368. 
of  parts  of  bills  in  set,  78,  661. 
of  a  check,  678«. 
discharge  of, 

by  striking  out  indorsement,  26,  375. 

by  failure  to  take  steps,  36.  43,  66,  69. 

by  taking  qualified  indorsement,  64. 

by  certification  of  check,  80. 
action  against  on  day  of  maturity,  475-478. 

Indorser   Tritliout    Recourse  :     (^See 

Without  Recourse.) 
Infant : 

indorsement  by,  17,  321-322,  452. 

defense  of  infancy,  427. 
Inland  Bill : 

defined,  60,  608. 

protest  of,  54,  501,  566,  643«. 
Installments : 

do  not  render  sum  uncertain,  9,  202-208. 

nor  provision  that  upon  default  in  one,  all 
shall  be  due,  9,  208-211. 
Interest: 

does  not  render  sum  payable  uncertain,  9,  199- 

202. 

runs  from  what  time,  15,  i66;z,  301. 
overdue  does  not  dishonor  paper,  394-395. 
alteration  in,  57. 

demand  note  payable  with,  504-506. 
taking  in  advance  is  not  usury,  554. 
Interpretation : 
date,  13,  285-288. 
blanks,  13,  2S8-298. 
ambiguous  language,  15,  298-304. 
ambiguous  signatures,  16,  304-324. 
codifying  statutes,  119,  127-131,  442. 
Inurement : 

doctrine  of,  as  to  notice,  530-532. 
I.O.  U. : 

Whether  a  negotiable  instrument,  164-166. 
Irregular  Indorser : 

liability  of,  32,  478-480,  673«. 
Joint  Parties: 
acceptors  or  makers, 

presumption,  16,  302-304. 

presentment  to,  39,  519. 
payees, 

in  instrument,  27,  255-258. 

indorsement  by,  24,  35,  371. 
drawers,  notice  to,  47. 
indorsers, 

presumption,  35,  480-487. 

contribution  among,  482-485. 

right  to  securities,  "485-486. 

notice  to,  47. 
drawees, 

bill  addressed  to,  59,  603-605. 

presentment  to,  66,  639-640. 


Joint  Vsirtles  —  continued. 

retransfer  to  one  of  the,  579». 
discharge  of  one,  596/2. 

Judgment  : 

authorizing    confession  of,   does  not    render 

instrument  non-negotiable,  10,  230-231. 
in  favor  of  principal  debtor,  discharges  surety, 
593«- 
Iiaclies :  (See  Delay.) 
Law  ]?Iereliant : 
when  governs,  7,  455-457. 
history  of,  132-160. 

liiability  of  Parties  :  (See  Parties.) 
liieu : 

on  instrument  constitutes  holder  for  value,  19, 
337-338- 
liOst  Instrument ; 

liability  on,  446,  572??. 
protest  of,  72. 
right  of  finder,  382. 

ITIails  :  (See  Post-Office.) 
inaker : 

liability  of,  31,  446. 
admissions  by,  31,  447. 
note  to  maker's  own  order,  79,  254. 
signature  of,  163, 
negligence  in  signing,  435-445- 
joint  and  several,  302-304. 
presentment  not  necessary  to  charge,  498-5oa 
inarriage  :  (See  Coverture.) 
transfer  by,  38i«. 

ITIatnrity:  (5<y' Gr.\ce  ;  Holid.w.) 

day  of,  42,    387-388,  504. 

time  of,  for  demand  notes,  504-509. 

action  on  day  of,  premature, 
against  maker,  388,  501??. 
against  indorser,  475-478. 

protest  before  day  of,  when  proper,  71. 
ITIoney  : 

instrument  must  be  payable  in,  8,  61,  218-227, 

what  constitutes  current,  219-227. 

election  in  lieu  of,  10,  233. 

promise  in  addition  to  payment  of,  10,  228-234. 

foreign,  225-227. 

specifying  current,  does  not  affect  negotiabil- 
ity, II. 

alteration  in  kind  of,  57. 
Neglige  nee  : 

is  not  bad  faith  but  only  evidence  of  it,  400-405. 

in  signing  instrument,  435-445. 

in  leaving  spaces,  etc.,  590-592. 

Negotiable  Instruments: 

history  of,  142-160. 
codification  of,  117-132. 
kinds  of,  142- 160. 
See  Bills  of  Exchange. 

Pko.missorv  Notes. 

Checks. 

Bonds. 
form  of    (see   For.m  of  Negotiable  Instri7- 

iMENTS). 

continuation  of  negotiable  character,  26,  325. 
defenses  to  (see  Defenses). 
paper  payable  in  trust  is,  412-414. 

Negotiable  Instruments  liaiv  : 

te.xt  of,  5-83. 
origin  of,  122-125. 
when  takes  effect,  83. 
laws  repealed  by,  83. 

Negotiation:  (.?£-<•  Indorsement;  Delivery.) 

defined,  21,  142,  341. 

by  delivery,  21,  342. 

by  indorsement  and  delivery,  21,  343-348. 

may  delay  presentment,  37. 

of  overdue  instrument,  356,  387-397. 

of  guaranties,  491-494. 


INDEX. 


697 


The  References  are  to  Pages, 


Non-Acceptance  :  {See  Acceptance.) 

effect  of,  68,  641-642. 

notice  of,  necessary,  43,  53,  528. 

effect  of  subsequent  presentment  for  payment, 
528. 
Non-Negotiable  Notes: 

what  are,  79,  2S3//,  666. 

have  grace,  667-668. 

have  presumptive  consideration,  668-671. 

liability  of  indorser  of,  247??,  348«,  S28«,  672- 

673- 
any  instrument  in  hands  of  holder  not  in  due 
course  is  like,  29. 
Non-Payment : 

notice  of,  when  necessary,  43,  528. 

Notarial  Act  of  Honor  : 

necessary  to  payment  for  honor,  76,  658. 
Notary  :  (See  Protest.) 
when  presentment  by,  necessary,  502-503. 
protest  by,  69-70,  643-647. 
whether  he  must  act  in  person,  502,  648. 
signature  and  seal,  69,  503. 
fees  of,  420-421,  568«. 
Notice  :  (See  Holder  in  Due  Course.) 
of  defect  or  defense,  29,  400-414. 
from  face  of  paper,  405-414. 
before  full  amount  paid,  28,  415. 
of  accommodation,  20,  339-340. 
not  from  indorsement  without  recourse,  367. 
overdue  paper,  387-397. 
overdue  interest  not,  394-39S- 
not  because  payable  in  trust,  412-414. 
Notice  of  Dishonor: 
necessary   to  charge  drawer  or  indorser,  43, 

528. 
what  constitutes  sufficient  notice. 

by  whom  given,  44,  528-533. 

form  of,  45-+6,  533-537.  645^. 

mode  of  service,  46,  537-539- 

to  whom  given,  47,  540-542. 

within  what  time,  48-49,  542-SS2- 

at  what  place,  50,  552-556. 
when  delay  e-xcused,  52,  556-558. 
when  notice  dispensed  with. 

as  to  drawer,  52,  558-561. 

as  to  indorser,  53,  561-563. 

due  diligence,  52,  563-564. 

waiver,  50,  564-568. 

prior  notice  for  non-acceptance,  53,  568. 
proof  of  notice,  568-570. 
successive  notices,  50,  550-552. 

Noting : 

delay  excused,  72. 

subsequent  extension  of  protest,  70 

in  acceptance  for  honor,  74. 

Office  : 

holder  of,  as  payee,  12,  261-262. 

Order : 

bill  must  contain,  8,  173-175- 
unconditional,  8,  9,  176-195. 
no  additional  act,  10,  228. 
bill  must  be  payable  to,  or  bearer,  8, 11-12,  248- 
270. 
"  Order  or  Bearer  : " 
not  necessary  by  law  merchant,  283. 
not  necessary  by  bills  of  exchange  act,  iin, 

62I«. 

necessary  by  negotiable  instruments  law,  u, 
12,  248-270. 
Overdue  Bill  or  Note  ; 

is  payable  on  demand,  11,  236,  356. 

continues  negotiable,  3S6. 

indorsement  of,  237,  356. 

transferee  not  liolder  in  due  course,  97,  387- 

397- 
overdue  interest,  394-395- 
when  demand  note  is  overdue,  38,  396,  504- 

509- 


Overdiie  Bill  or  "Sote  — continued. 

acceptance  of,  62. 

presentment  for  acceptance  before,  66,  63a. 

accommodation  paper,  388-393. 

Parol :  (See  Wrh  i.no.) 
acceptance  by,  6ii«. 
varying  indorsement  by,  354«. 

Particular  Fund: 

indication  of,  9,  183-1S8. 

order  or  promise  to  pay  out  of,  9,  180-183. 

Parties: 

primarily  liable,  7,  36,  498. 

maker,  31,  446. 

acceptor,  31,  448. 

discharge  of,  34,  571. 
secondarily  liable,  7,  36,  41,  501. 

drawer,  31,  452. 

indorser,  34,  474. 

irregular  indorser,  32,  478. 

discharge  of,  55,  592. 
guarantor,  486. 

acceptor  for  honor,  73-75,  651-657. 
drawee,  8,  270. 
payee,  11,  12,  248-262. 
;oint  and  several    (see  Joint  Parties). 
accommodation    (see  Accommodation  PaRTv). 
alteration  in,  57,  585. 
to  action  must  appear  on  bill,  16,  304. 
Partners : 
signatures  by,  3o6«,  6i2«. 
accommodation  paper  by,  405-406. 
presentment  for  payment  to,  3^  646-647. 
notice  of  dishonor  to,  47,  541,  558-559. 
authority  to  make  alterations,  585-587. 
authority  to  accept,  639-640. 
form  of  acceptance,  6i2«. 
indorsement  by,  24,  274-275. 

Patent  Rigliti^: 

negotiable  instrument  given  for,  8x. 

Payee  : 

who  may  be,  11-12,  254-260. 
must  be  certain,  12,  248-254. 
fictitious,  12,  263-268. 
two  or  more,  12,  24,  255,  371. 
one  or  some  of  several,  12,  258. 
cashier  as,  25,  373. 
name  misspelled,  25,  37J. 
admissions  as  to,  31,  447,  448,  452. 
whether  holder  in  due  course,  44a. 

Payment: 

to  conditional  indorsee,  24,  367. 
discharges  instrument,  26,  54,  571-579. 
holder  may  enforce,  27,  379-385. 
bill  or  note  as,  385/;. 
of  forged  bill,  448-451  . 
in  due  course,  .12,  571-572.      - 
by  indorser  does  not  discharge  maker,  574-577- 
by  parly  secondarily  liable,  55,  590-602. 
by  accommodated  party,  55,  000-602. 
of  bills  in  a  set,  78. 
after  notice  r)f  defect,  28,  415. 
of  bill  under  forged  indorsement,  468,  473. 
renewal  note  as.  573. 
Payment  lor  Honor: 
when  proper,  75,  658. 
by  whom,  75,  658. 
for  whom,  75,  658. 
formal  requisites, 

prior  dishonor  and  protest,  75,  658. 

notarial  act  of  honor,  76,  658. 

declaration  of  Intention,  76. 
elTcct  of, 

disch.irge  f>f  parlies  subsenuent,  76,  659«. 

li.ibllily  of  prior  parlies,  76,  658. 
effect  iif  refusal  to  receive,  76. 
does  mmI  .ipply  to  notes,  659. 
PayiiK-iil  Miipra  |>roleNt  t  (See  Pavmbnt 

I(jK   riuNoU.J 


698 


INDEX. 


The  References  are  to  Pages. 


Pencil : 

necessary  writing  may  be  in,  i6i. 
Personal  Representative:  (See  Exec- 
utor.) 

Place: 

of  drawing  or  payment  need  not  be  specified, 

II,  283. 
of  indorsement,  presumption,  26. 
of  presentment 

for  payment,  38,  513. 

for  acceptance,  dyjn. 

to  acceptor  for  honor,  74. 
of  acceptance,  63,  65,  499^,  6a8. 
of  serving  notice,  50,  552. 
of  protest,  72. 
of  payment,  65. 
alteration  in,  57. 

Post-office : 

notice  of  dishonor  through,  46,  48,  49,  50,  538- 

539.  544«.  544-550-  552,  553-556. 
delays  caused  by,  49,  521-523. 
interruption  of  mails  by  war,  556-558. 

Pre-existing     Debt:    {See    Antecedent 

Debt.) 
Presentment    for  Acceptance:    {See 

Acceptance.) 
When  necessary,  65,  632-636. 
within  what  time,  65,  632-636. 
what  is  sufficient,  66,  637-640. 

to  whom,  66,  637,  639-640. 

at  what  place,  637;;. 

e.xhibition  of  bill,  638-639. 

by  whom,  66. 

on  what  day  and  hour,  66,  67. 
when  delay  excused,  67. 
when  presentment  e.xcused,  67,  641. 
effect  of  dishonor,  68,  641-642. 
Presentment  for  Payment: 
necessity  of, 

not  to  charge  acceptor  or  maker,  36,  498. 

not  after  dishonor  for  non-acceptance,  68. 

to  charge  drawer  or  indorser,  36,  50. 

to  charge  acceptor  for  honor,  74-75,  653,  656. 
what  constitutes  sufficient,  37-39,  501-521. 

by  whom,  37,  501-503. 

at  what  time,  37,  38,  504-512. 

at  what  place,  38,  512-517. 

to  whom,  37,  517-5x9. 
when  maker  dead,  39,  518. 
when  makers  joint,  39,  519. 

by  e.xhibiting  instrument,  38,  520-521,  525. 

to  acceptor  for  honor,  74. 
when  delay  excused,  40.  521. 
when  presentment  excused, 

no  right  to  expect  it,  40,  523. 

when  impossible,  41,  524-527. 

when  waivedf  41,  ^27. 
of  checks,  8d,  676-681. 
Presumptions:  (See  Birden  of  Proof.) 
of  consideration  in  negotiable  instrument,  18, 

325- 

of  consideration  in  non-negotiable  instrument, 
668-671. 

of  value  for  everj'  signature,  18. 

of  time  of  indorsement,  25,  374. 

of  place  of  indorsement,  26,  375. 

that  holder  is  holder  in  due  course,  30,  422,  571. 

of  order  of  indorsers'  liability,  35,  480-486. 

that  parties  indorse  jointly  and  severally,  35. 

from  deposit  of  notice  of  dishonor  in  mail,  49, 
538. 
Primary  Party  :  (See  Parties.) 
Principal  :  (See  Agent.) 
Procuration : 

signature  by,  17,  320. 
Promise  :  (See  Form.) 

note  must  contain  a,  18,  164-172. 

must  be  unconditional,  8,  9,  176-195. 


Promise  —  continued. 
must  not  be  of  act  additional  to  payment  of 

money,  10,  228-234, 
to  pay  out  of  particular  fund,  9,  180-188. 
to  accept,  when  an  acceptance,  62,  613-616. 

Promissory  Note  : 

origin  and  history,  145-146,  154-155,  666. 

definition  of,  79. 

form  (see  Form  of  Negoti.\ble  Instruments). 

interpretation  (see  Interpretation). 

non-negotiable   (see   Xon-negoti.\ble  NotesX 

protest  of,  54,  501-503. 

given  for  patent-right,  81. 

given  for  speculative  consideration,  82. 

ambiguous  instrument  may  be  treated  as,  15, 

27!J-272. 

Protest : 

when  proper,  54. 

notes  and  inland  bills,  54, 

for  better  security,  71. 
when  necessary,  54. 

foreign  bills,  69,  643. 

bills  accepted  for  honor,  74.  75,  651. 

reference  in  case  of  need,  74. 

before  payment  for  honor,  75,  658. 
what  constitutes  sufficient, 

form  and  contents,  69-70,  643-647. 

by  whom,  70.  648-650. 

on  what  day,  70. 

at  what  place,  71. 
mode  of  making, 

noting,  70. 

certificate,  70,  643-647. 

lost  bill,  72. 
when  excused,  72,  562. 
as  proof  of  notice  of  dishonor,  568-570. 
fees  reasonable  for,  420-421,  568«. 
waiver  of,  51,  566-567. 

Purchase  for  Value  Without  Notice: 

(See  Holder  in  Due  Course.) 

Purchase  of  Instrument :  (See  Trans- 
fer.) 
distinguished  from  loan,  4i9«. 
distinguished  from  payment,  578-579. 

Qualified  Acceptance  : 

definition  and  effect,  64,  626-631,  64on. 

CtuallAed  Indorsement: 

definition  and  effect,  12,  365. 

Ratiticatiou : 

of  forgery,  324. 

of  unauthorized  alteration,  587«. 

Reasonable  Time  :  (See  Time.) 
how  determined,  7,  239,  504-509,  636«. 

Referee  in  Case  of  Need  : 

defined,  60,  605, 

protest  before  presentment  to,  74. 

excuse  for  delay  in  presentment  to,  75. 

Re-issue  :   (See  Retransfer.) 
by  prior  party,  26,  359-361,  378,  599-600. 

Release  :  (See  Discharge.) 
of  principal,  54,  571-592. 
of  surety  (see  Discharge  of  Surety). 

Removal  from  State : 

effect  upon  presentment.  515-516. 
effect  upon  notice,  554-556. 

Renewal  Note : 

whether  payment  of  former  note,  573.  582-583- 

forgery  of,  582-585. 

promise  to  make,  renders  instrument  contin» 

gent,  246-247. 

Renunciation : 

discharge  by,  56,  579-581. 
writing  or  delivery  necessary,  56. 

Restrictive  Indorsement  : 

definition  and  effect,  22-23,  354-365- 


INDEX. 


699 


The  References  are  to  Pages. 


Retransfer : 

to  prior  party,  effect  of,  26,  359-361,  378,  S79«, 
579-585.  592".  599-600. 
Sale  of  Negotiable  lustruiueut :  (See 
Negotiation;  Transfer;   Warrantv.) 

Saturday : 

a  half  holiday,  84. 
maturity  of  instrument  on,  4s. 
presentment  for  acceptance  on,  87. 
Seal: 
effect  upon  negotiability,  11,  283-284. 
of  notary,  69. 

Secondary    Party:    {See   Partibs;   Dis- 
charge OF  Surety.) 

Security:  {See  Collateral  Securities.) 
protest  for  better,  71. 

Seller  of  Negotiable  Instrument : 

warranties  by,  34,  452-474. 
agent's  liability  as,  36,  473. 
payment  distinguished  from  sale,  578-579. 

Set,  Bills  iu  a  :  {See  Bills  in  a  Set.) 

Set-Off: 

as  a  defense,  428K,  302,  387,  495. 

SigUt  Bill«s  : 

presentment    for    acceptance,    9,65,  234-236, 

632,  633. 
have  grace,  234-236. 

Signature : 

only  those  whose  signatures  appear  are  liable, 

16,  183-185,  304-306,  517. 
by  maker  or  drawer,  8,  162-163,  289-291. 
by  acceptor,  61,  610. 
by  indorser,  21,  348,  164. 
by  agent,  16,  311,  320K,  517. 
fictitious,  16,  164,  306-311. 
irregular,  15,  302,  32,  478. 
ambiguous,  15,  16-17,  304-3ii- 
forged,  18,  322-324. 
presumption  as  to  value  for,  i8. 
joint,  16,  302. 

distinguished  from  subscription,  163XI. 
on  blank  paper,  14,  289-291. 
on  incomplete  instrument, 

not  delivered,  14,  280-283. 

delivered,  13,  291-298. 
lacking  on  instrument,  386. 
obtained  by  trick,  431-445. 

Spaces : 

unauthorized  filling  of,  590. 

distinguished  from  blanks,  590». 
Special  Indorsement  : 

definition  and  effect,  22,  351. 

written  above  blank  indorsement,  22,  352-354- 

of  instrument  payable  to  bearer,  24,  368-371. 
Statement  of  Transaction: 

does  not  render  bill  or  note  conditional,  9,  190. 

Statute  of  Frauds : 

irregular  indorsement,  48o». 
guaranties,  489-491. 
defense  to  instrument,  592^. 
Stolen  Instrument  ;   {See  Lost  Ihstbu- 

MF..NT.) 

Sum  Certain:  {See  Certainty.) 
Sunday  :  {See  Holiday.) 
Surety :   {See  Discharge  of  Surbty  ;  Guar- 
antor.) 

as  co-maker,  302-304. 

contribution  among  sureties,  482-485. 

right  to  securities,  485-486. 

defenses  available  to,  494-497- 

reservation  of  rights  against,  55,  594-590- 

Tender  of  Payment : 

by  principal  discharges  surety,  55,  593- 
what  amounts  to,  36,  499-500. 


Time  : 

how  computed,  7,  42,  504M. 

reasonable,  how  determined,   7,  239,   504-509^ 

636//. 
certainty  of,  9-10,  234-248. 
of  indorsement,  presumption,  25. 
for  making  presentment,  37,  39,  504. 
of  maturity,  42,  234-238. 
for  giving'  notice  of  dishonor,  48-50,  54a. 
allowed  drawee  to  accept,  62,  6i9«. 
acceptance  qualified  as  to,  64,  629. 
for  presentment  for  acceptance,  66,  632-636. 
for  making  protest,  70. 
for  presenting  check,  80,  676-681. 
given  to  principal,  discharges  surety,  55,  596- 

598. 
when  indorsement  subsequent  to  transfer  takes 

effect,  26,  373. 
when  insufficient,  67. 

Title  :  {See  Holder  in  Due  Course.) 

when  defective,  26,  28,  29. 

warranty,  34,  408. 

of  indorsee  under  restrictive  indorsement,  33, 

35S,  364- 
of  indorsee  under  infant's  indorsement,  17,  331. 
of  transferee  without  indorsement,  26,  375. 
of  holder  of  instrument  payable  to  bearer  and 

restrictively  indorsed,  368-371. 
of  holder  in  action,  382-384. 
of  holder  to  guaranty,  491-494. 

Trade  Name ; 

signing  in,  16,  306. 

Transfer :    {See   Negotiation  ;    Holdbk   m 
Due  Course.) 
what  constitutes,  341. 
by  delivery,  21,  342. 
by  indorsement,  21,  343. 
without  indorsement,  26,  375-378. 
retransfer,  26,  378. 
by  death,  379-381. 
by  marriage,  38i«. 
for  purposes  of  suit,  384«. 
in  trust,  361-364. 
warranties,  34,  452-474. 
when  overdue,  27,  387-397. 
on  last  day  of  maturity,  387-388. 
of  overdue  accommodation  paper,  388-393. 

Trust : 

indorsement  in,  23,  361-364. 
under  conditional  indorsement,  24,  367, 
instrument  payable  in,  412-414. 
holder  may  recover  in  trust  for  indorser,  574- 
577- 
Uncertainty  :  (.?ft' Certainty.) 
Unconditional   Promise    or   Ordori 
(.V,v  1-^.km). 
necessary  to  negotiability,  8,  176. 
when  order  or  promise  is  unconditional,  9, 
176-195. 

Usury : 

purchase  of  business  paper  Is  not,  419*. 
taking  interest  in  advance  is  not,  554. 
as  a  defense,  427«. 
warranty  against,  461-466. 

Value  :  {See  Holder  for  Value.) 

defined,  7,  18. 

need  not  be  specified,  11,  283. 
holder  for,  19,  334-338.  397-399- 
antecedent  debt  as,  18,  327-333- 
Virtual  Acct'ptanco  t 
form  of,  '<-!,  <ii3-6i6. 
effect.  6i6«. 

W^alver  : 

of  benefit  of  law,  10,  231. 
of  prcseiUmeiit  for  payment,  41,  527- 
of  notice  of  dishonor,  S'^-S'.  564-.567- 
of  protest,  51,  72,  566-567. 


700 


INDEX. 


Tk»  References  are  to  Paget. 


Warranty  of  Seller : 

where  transfer  by  delivery,  34,  452-471. 
where  transfers  by  indorsement,  34,  472. 
by  agent  who  transfers,  36,  473. 
by  agent  who  signs  for  principal,  311-316. 

'Witbont  Recourse : 

indorsement  qualified  by,  23,  356,  365-367. 
warranties  wnere  so  transfeft-ed,  34,  453-474- 


"Writing : 

defined,  7. 

necessity  of,  in  negotiable  instrument,  8,  161. 

necessity  of,  in  case  of  renunciation,  56. 

holder  may  require  acceptance  in,  61,  6io-€ii, 

acceptance  by  separate,  61. 

necessity  of,  in  acceptance  for  honor,  73. 

promise  to  accept  must  be  in,  62,  613. 

conflict  with  print,  15,  301, 


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